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 3130 ~~August~~June ~~2005~~2006

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~~Transcript ~~Corporation~~of ~~Limited~~presentation by Tarek Robbiati, Deputy Chief Financial ~~Results~~Officer ~~for~~Telstra, at the ~~Year~~ASX ~~ended~~Investor 30Hour ~~June 2005~~ Conference Appendix 3X –Initial Director’s Interest Notices Cash Capital Expenditure Guidance Telstra presentation to the UBS Media & Telecommunications Conference Telstra presentation to the Citigroup Next Generation Wireless Communications in Australia Conference Transcript of Telstra’s Chief Executive Officers address to the National Press Club in Canberra

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


17 May 2006		Office of the Company Secretary

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

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

ELECTRONIC LODGEMENT

Dear Sir or Madam

In accordance with the ~~Listing~~listing ~~Rules~~rules, I ~~enclose~~attach a transcript of a presentation by Tarek Robbiati, Deputy Chief Financial Officer Telstra, at the ~~following~~ASX ~~for~~Investor ~~immediate~~Hour Conference, for release: to the market.

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

Fiona Mead Acting Company Secretary On behalf of Douglas Gration Company Secretary


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

~~Telstra~~Copyright in ~~Corporation~~this ~~Limited~~document ~~and~~is ~~controlled~~reserved ~~entities~~to ~~Preliminary~~the ~~final~~Crown ~~report~~in right of the Commonwealth of Australia. Reproduction of this document (or part thereof, in any format) except with prior written consent is prohibited

~~Telstra~~NATIONAL TRANSCRIPTION ~~Corporation~~SERVICES ~~Limited~~PTY LTD abn: 36 110 082 507 Level 6, 221 Queen Street, Melbourne 3000. Telephone: 1800 144 188 Fax: 03 9670 8582 Offices in: Brisbane, Darwin, Canberra, Sydney, Parramatta, Townsville and ~~controlled~~Newcastle Email: ~~entities~~transcripts@nattrans.com.au

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

1TELSTRA CORPORATION LIMITED

ASX INVESTOR HOUR

SYDNEY – 16 MAY 2006

TAREK ROBBIATI

DEPUTY CHIEF FINANCIAL OFFICER

ASX 16/05/06

~~Telstra~~FACILITATOR: ~~Corporation~~Well, ~~Limited~~it’s still just good morning. Nice to see everybody down here again for investor hour. As you’re all aware, investor hour is brought to you by the Australian Stock Exchange, the Australian Shareholders Association and ~~controlled~~the ~~entities~~SDIA. ~~Preliminary~~We ~~final~~get ~~report~~together and pull our collaborative knowledge to bring together I guess speakers that we think you’ll find interesting. You’ve probably noticed we usually take a macroeconomic and then a microeconomic view, sometimes the stocks to watch, sometimes a broad economic focus. But today’s speaker is a little bit different. Before I get into the introductions of today’s speaker I’d like to just go through the housekeeping very quickly, obligatory requirements.

~~Appendix 4E~~Exits of course you know you came in through one just there. There’s others right at ~~Preliminary~~the ~~final~~very ~~report~~back. You’ll also see them off to the side. But when you’re leaving the 30premises ~~June 2005~~we choose not to use these ones on the side. In the event ~~Telstra~~of ~~Corporation~~some ~~Limited~~sort ~~ABN~~of 33evacuation ~~051~~there’s ~~775~~a ~~556~~couple of different tones that they use. There’s a beep-beep one, and that’s just to let us know that something is amiss and if we do need to leave there will be a whoop-whoop; easy, it’s fairly straightforward.

~~Results~~Next ~~for~~month’s ~~announcement~~topic is Ross Greenwood. We’ve got fliers out there on the front to keep you up to date. I always suggest visiting the ~~market~~ASX or the ASA web site to see what’s going to be on. If I could just ask – it’s probably an opportune moment to ask you to turn off your mobiles if you’re with Telstra. Just even if you’re not, in case it disturbs the speaker as we go along. Can I just have a quick show of hands, I’m interested to know who is at investor hour for the first time. So there’s some regulars here. For those of you who found out about investor hour, can I just see a show of hands those of you who found the information via the ASX web site. Lovely, thank you very much.

		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

Now, today’s speaker, Tarek Robbiati, was appointed to the position of Deputy Chief Financial Officer at Telstra in 2005. His responsibilities include the role of group financial controller to the operations and program office and the finance structure supporting these areas. He also provides corporate finance advice to the CFO and CEO and supports investor relation matters including T3. I think today’s talk will be quite insightful. Having had a quick look at the slides, there were certainly some things of interest there to me. I won’t say any more about the speaker. I might let him give the background because he’s probably more abreast of it than I am. So if you put your hands together and welcome Tarek to the state.

~~For~~MR ~~fiscal~~ROBBIATI: ~~2005~~Thank you and ~~fiscal 2004~~welcome, ~~all~~everybody. ~~items~~I’m ~~included~~Tarek inRobbiati ~~our~~and ~~statement~~I’m here standing on behalf of ~~financial~~John ~~performance~~Stanhope, ~~are considered~~my toboss, bechief ~~from~~financial ~~ordinary~~officer ~~activities~~of Telstra. AsHe sends his apologies, but he had to attend a ~~result~~pressing family matter today, ~~our~~and ~~profit~~that’s ~~from~~the ~~ordinary~~reason ~~activities~~why ~~after~~you don’t see him here and I’m substituting ~~tax~~him. ~~available~~What we’re going to do today is to share some key elements of Telstra’s ~~Entity~~new ~~shareholders~~strategy isthat was ~~the~~outlined ~~same~~first ason ~~our~~15 ~~net~~November 2005. ~~profit~~But ~~available~~before I do that, I’d just like to ~~Telstra~~give you a couple ~~Entity~~of ~~shareholders~~points about myself. I am European, I’m Italian. I’ve worked in the telecom industry for 15 years, either

~~During~~ASX ~~fiscal~~16/05/06 ~~2005,~~1 ~~there~~TAREK 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’. ROBBIATI

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~~as ~~Corporation~~a ~~Limited~~consultant consulting for the vast majority of telcos in Europe, or as an equity analyst, the one who publish research reports. I worked for Lehman Bros as an equity analyst for four years and ~~controlled~~then ~~entities~~my ~~Preliminary~~last ~~final~~two ~~report~~years in my career I spent at Orange in the UK working for Orange and the France Telecom Group. Now I’m here in Australia and I’m very much enjoying it.

~~Appendix 4E~~So now back onto the real stuff. Let’s talk about the strategy, but I’m afraid before ~~Preliminary~~we ~~final~~talk ~~report~~about the strategy elements I have to refer you to the disclaimer. So please 30take ~~June 2005~~a few seconds to read this because there are certain things that we mention here that have to be put in the proper legal framework. Thank you. Now, let’s talk about our strategy. Telstra ~~Corporation~~is ~~Limited~~a ~~ABN~~business 33that ~~051~~has ~~775~~strong advantages. ~~556~~It is the largest telecom operator in Australia that offers the full suite of services to capitalise on the trend of truly converged services which I will describe in a moment.

~~Results~~First, ~~for~~we have ~~announcement~~an existing customer relationship with 10 million fixed-line customers and nearly nine million mobile customers throughout the country. We intend to leverage these relationships to drive penetration of newer products such as broadband and the application and content we can bring to customers to make businesses more productive and enrich consumers’ lives. In addition, we have an excellent advertising and search capability via Sensis. Remember every month more than 12 million Australians use a Sensis service. In the vitally important emerging broadband market ~~(continued)~~Telstra is the leading player and we are extending our lead. Over the last two years our retail broadband market share has increased from 37 per cent to 43 per cent and it’s growing again.

~~Dividends~~We ~~paid~~have orthe ~~declared~~strongest brand name in the telecoms market in Australia, a name that just every member of the community is familiar with. Along with our leading domestic presence, we also have international presence through the recently merged CSL and New World Mobility Group in Hong Kong, TelstraClear in New Zealand, and Reach. Telstra has the scale and the scope in telecoms in Australia with a full suite of products allowing us to drive economies of scale. This is a very important point because this full suite of products and ability to integrate them allows us to achieve cost reductions as we rationalise platforms and streamline the business.

	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

With this, we’re well-positioned to defend against emerging threats. If we look at overseas experience, particularly the US, we are currently seeing telcos reconsolidating to gain the advantages of an integrated model, that same integrated model that we already have here at Telstra. In Europe it’s not different. We are seeing pure wireless players who are at a disadvantage in certain markets push for integrated solutions on their own. Finally, our financial position as a company is sound. We have an investment great credit rating and this gives us the flexibility to fund the sweeping transformation of our business that is necessary as we enter the broadband world.

~~Our~~Now, ~~dividends~~these ~~for~~were ~~fiscal~~the ~~2005~~good ~~and~~news. ~~fiscal~~You ~~2004~~may ~~are~~ask, ~~fully~~if ~~franked~~this atis aall ~~tax~~so ~~rate~~nice, why do we have to change? Well, before I get into the details of ~~30%.~~our new strategic

~~The~~ASX ~~interim~~16/05/06 ~~dividend~~2 ~~(including~~TAREK ~~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.~~ ROBBIATI

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.

direction let me just take you back a step and explain why it is imperative that we develop this new strategy and implement it and why we need to make some fundamental changes. The reality is that the financial trends at Telstra ~~Corporation~~have ~~Limited~~not been good and they ~~controlled~~have ~~entities~~continued ~~Preliminary~~from ~~final~~the ~~report~~last fiscal year. Telstra’s top line growth rate has been decelerating. What is concerning is that PSTN revenues – the revenues from the traditional fixed telephony business – are declining at such a rate that the revenue base associated with our growth from broadband, mobile and Sensis is not yet big enough to compensate for the decline of the PSTN.

Our telecom-related revenue makes a shifting towards lower margin products with PSTN revenues now at 33 per cent of total sales compared to 40 per cent two years ago. Broadband growth is strong and its margin will improve as we build scale and reduce operating costs. It is essential that Telstra ~~Corporation~~maximises its ~~Limited~~market share in newer revenue streams to capture as much of the migration as possible. On the cost side of the equation – you can see that on the right-hand side of the graph – trends have also been concerning. With multiplicity of network elements and rapidly ~~controlled~~rising ~~entities~~traffic volumes, the cost of running the business is growing rapidly. Multiple evolutions of mobile technology mean that we are currently running three different wireless networks. We have multiple evolutions of data services, most of which are still in the network. This is clearly inefficient.

~~Australian~~Now, ~~Business~~how ~~Number~~are ~~(ABN):~~we 33going ~~051~~to ~~775~~address ~~556~~this? Of course our objective is to create long-term shareholder value. But what does that mean? Our vision is to do for customers what no-one else has done in the past, and that is, creating a world of one click, one touch, one button, one screen, one-step solutions that are simple, easy and valued by individuals, businesses and governments alike. We will get to know our customers in a way that was never done before through market-based management. Market-based management is simply the discipline of making sure that we optimise our ability to go to market and acquire customers.

~~Contents~~We will also provided integrated communication services. We will invest to take complexity out of our business and ~~reference~~simplify ~~page~~our infrastructure. We must absolutely win in broadband and wireless by doing it smarter around value-added and integrated services and not just price. We will invest in new services and applications to differentiate ourselves in the market. I’ve said before Telstra had the breadth of products which is unique in the industry. We will accelerate growth opportunities at Sensis. Sensis we refer to as our information services, search and transaction business. And we will target investment where we can create value for our shareholders. I will address all of these points in the rest of the presentation.

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.

We’re going to deliver a value proposition to customers based on our competitive advantage as Australia’s leading telecom company. Market-based management is the starting point in our value proposition, and I’ll speak about that shortly. The next plank of our value proposition is our differentiated content. We are leveraging Telstra’s applications and services

4 ASX 16/05/06 3 TAREK ROBBIATI

~~Telstra~~and ~~Corporation~~the ~~Limited~~exclusive content of BigPond, Australia’s leading ISP, and ~~controlled~~Sensis, ~~entities~~our ~~Preliminary~~information services, ~~final~~search ~~report~~and transaction business, to provide a richer customer experience. Not only we have the differentiation of content, but also we can provide this over multiple devices to deliver a truly seamless integrated customer experience.

		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

This isn’t something that is out there in the future. It is here and now. It’s available now to our BigPond customers nationally and within our metro 3G coverage area. Upon completion of our national high-speed 3G mobile network these services will be available nationally for all mobile customers. We have already successfully moved Sensis from being a pure print business 10 years ago to being a market leader in online search. We’re taking that integration step further and it’s not only about enabling you to find what business you’d like to buy from, or in the case of Trading Post, enabling you to find a product you might be looking for, but we are taking it one step further, which is enabling you to actually do the transaction. We have already started this in our Trading Post business.

~~The~~This value proposition, in our view, is attractive to customers because it delivers to them what they want, when they want it, and above ~~statement~~all, ofdoes ~~financial~~it ~~performance~~in a simple way. This simplicity is critical anbecause ~~extract~~you ~~from~~shouldn’t ~~our~~have ~~full~~to ~~financial~~be ~~report~~a technology expert to be able to do these things. Customers ~~Refer~~simply won’t use it if it’s going to take them 20 minutes to ~~the~~figure 30out ~~June 2005~~how ~~financial~~to ~~report~~do ~~lodged~~it. So our vision, our one click, one button, one touch, one screen, one step simplicity is what we are driving towards. The simplicity matched with ~~this~~our ~~document~~ability to integrate, differentiate and know our customers better than anyone else will allow us to provide real value to customers, value that they’ll be willing to pay for. The result will be a change in the ~~detailed~~current ~~notes~~pricing dynamics from commoditisation of access to ~~this~~a model of value-based ~~statement~~pricing. Remember, customer value drives shareholder value.

5Now, let me talk about 3G. As you may know, we’re building a single national 3G network on the 850 MZ spectrum. Currently, only Telstra Cingular in the United States and Rogers Communications in Canada are using the 850 spectrum. Cingular is launching their network in June of this year. There has been a fair amount of press lately about closing down our CDMA network. The CDMA network will not be turned off until the coverage of our 3G network is at least as good. Around the world main carriers are moving away from CDMA. For instance, if you look at carriers in Korea, which represent 14 per cent of the worldwide CDMA market, they are all moving to 3G.

In addition, there is a significant number of operators considering building 3G networks on the 850 spectrum. Some of these also involve swapping from CDMA. Why is that? Well, it’s pretty simple. There’s a law of physics that says the lower the spectrum the greater the area that can be covered. So for a landscape like Australia we need a network that is going to cover a large distance without increasing the costs associated with rollout and maintenance. With the coverage of 850 we have been able to minimise the number of base


ASX 16/05/06		4		TAREK ROBBIATI

~~Telstra~~stations ~~Corporation~~we ~~Limited~~need, ~~and~~hence ~~controlled~~the ~~entities~~capital ~~Preliminary~~we ~~final~~will ~~report~~employ, to service at least the same population.

		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

By building the 850 network we will have Australia’s only truly national 3G mobile network. This will mean all Australians living in coverage areas will have access to our superior coverage and content. For the bush, it is high speed wireless network. It’s much better than what currently CDMA provides. We talked about coverage, but this is not the only advantage of 850. 850 also provides superior in-building coverage, which is of course critical to customers when they are at home or in the office. With a truly national network we can rationalise our platforms to bring greater economies of scale and reduce costs over time. And we are currently in the process of acquiring a range of handsets and PC cards from vendors.

We are seeing a good range of handsets being developed. The ~~above~~handsets ~~statement~~we will be able to offer will cover a range of ~~financial~~brands ~~position~~and isbands, anboth ~~extract~~for ~~from~~use ~~our~~in ~~full~~Australia ~~financial~~and ~~report~~for roaming overseas. ~~Refer~~But ~~to the~~3G 30is ~~June 2005~~not ~~financial~~just ~~report~~about ~~lodged~~handsets; it’s also about mobile broadband by either the PC with ~~this~~PC ~~document~~cards ~~for~~or PCs having 3G antennas, the ~~detailed~~like ~~notes~~of towhich ~~this~~Dell and Lenovo are producing ~~statement~~overseas. We will have a number of cards available at launch.

6Now, after 3G let’s move onto the next major component of our transformation. This is referring to the IT simplification. Our IT infrastructure is currently extraordinarily complex. As you can see from the slide, we have more than 1252 IT systems which we intend to reduce by at least 80 per cent over the next five years. We’re focusing on the implementation of fundamentally new capabilities in both the BSS – that is, the billing support systems – and the OSS areas – that is, the operating support systems – areas, which are needed to help us to manage the next generation networks.

This dramatic simplification of platforms and products and plans will pave the way for implementation of these new capabilities. There will be multiple benefits from that. We will have less complexity, less outages, lower costs and simplified processes for our front of house and back of house employees. We do have an aggressive timeline. Therefore, this begs the question, how are we going to do it? First, we’re going to have world-class partners, and second, we’re aiming to avoid custom builds. We’re aiming to avoid any custom software developments which is costly and expensive and in the long run difficult to maintain. It’s a huge task that confronts us, but radical change is needed here.

Now, let’s talk about marked-based management. You’ve heard the acronym a couple of times by now. The goal of market-based management is for us to know our customers like never before and deliver integrated services tailored to their needs. Our strategic marketing initiatives are the key plank in changing Telstra into a very customer-driven organisation. We are putting the customer at the centre of everything we do, and this will be reflected through what we believe will be improved market shares resulting in higher ARPU.


ASX 16/05/06		5		TAREK ROBBIATI

~~Telstra~~ARPU ~~Corporation~~stands ~~Limited~~for the average revenue per customer. And we will have a reduced churn. There will be emphasis on profit and ~~controlled~~loss ~~entities~~measurement ~~Preliminary~~at ~~final~~the ~~report~~customer segment level.

		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 market structure determined under market-based management drives the organisational design of our business. We have created dedicated teams to deliver value to each segment. Ultimately the real key to reinvigorating our top-line revenue growth is knowing our customer intimately and delivering value that they will be willing to pay for. We continue to focus on integrated voice, video and data services to truly differentiate what we can do for customers.

~~The~~Now, ~~above~~let ~~statement~~me ofclarify ~~cash~~a ~~flows~~few points about regulation. Particularly I’d like to clarify the regulatory principles that we are seeking for existing and planned investments. We all understand that there is ansubstitution ~~extract~~from fixed line to wireless, from legacy ~~our~~services ~~full~~to ~~financial~~IP-based ~~report.~~services, ~~Refer~~from legacy services and networks to ~~the~~next 30generation high ~~June 2005~~speed ~~financial~~networks, ~~report~~both ~~lodged~~fixed ~~with~~and ~~this~~wireless. We ~~document~~recognise ~~for~~that in the ~~detailed~~instances ~~notes~~where there is a clear bottleneck hotspot that regulation is required to ~~this~~provide ~~statement~~competitors access to the bottleneck services.

However, when it comes to undertaking investments in new networks that will provide high speed and improved services to customers at a significant cost to the company, the company needs to be able to earn a return for undertaking this investment. Our shareholders expect and are entitled to earn a return on significant investments where their capital is at risk. That’s our argument for Fibre to the Node. We do not want an access holiday. We will provide competitors access only on commercial terms.

On mobiles the recent comments that the 3G network should be regulated we believe are without foundation. Mobile has flourished due to the competitive nature of the industry, not through it being regulated. We welcome, therefore, the comments of the Minister of Finance that the government wants to ensure regulatory certainty and that he is quite confident that access to new mobile services will not be regulated.

Now, let’s talk about our guidance for the end of this fiscal year ’05-’06. As we announced back at our half-year results in February, we expect earnings before interest and tax to decline 7 to 10 per cent before the impacts of the strategic review overlays. Including the strategic review overlays we impact EBIT to decline by 15 to 20 per cent, that, is the second bar chart that you see on the chart. This is due to the additional investment we need to make in order to achieve future growth and simplify our business. This will increase to 21 to 26 per cent should we take a redundancy provision in June 2006 which satisfies the appropriate rules. The regulatory caveat remains pending key decisions by the regulator and/or the government. Notwithstanding this, we remain committed to improving long-term shareholder value.


ASX 16/05/06		6		TAREK ROBBIATI

To conclude, let’s summarise what Telstra’s transformation will deliver. The transformation of Telstra will deliver a needs-based solution to customers using the concept of one click, one touch, one screen, one button, one step, which represents truly integrated services in an easy to understand way. On the network side we’re building a state-of-the-art national 3G wireless network delivering speeds up to 14 mbps within six months of turning on the network with an average speed of 550 kbps to 1.1 mbps.

We are also building an IP core network which will deliver greater efficiency through common standards and platforms, a simpler environment in which to operate and lower unit costs. The flexibility the IP networks gives us will greatly improve our speed to market in a rapidly changing world. BigPond, it’s a huge asset in the portfolio and represents the future of this company. And I’m talking about broadband on both wireline and wireless platforms. We will integrate BigPond content across Telstra’s full suite of products which will grow access and content revenue. Our target is to further extend our lead in broadband by targeting retail market share growth.

Another growth engine for Telstra is Sensis. Sensis offers Australians choice. You can find what you need when, where and how you choose. Over 80 per cent of all Australian online advertisers are Sensis customers, offering unparalleled opportunity in the world of commercial search. Further integrating Sensis content search and transaction capability with Telstra’s communication platforms will set us apart from highly vociferous competition in this space.

Now, let me share with you a little bit more of a longer-term perspective than the previous guidance that we talked about for FY06. Here are our stakes in the ground. In closing, let me just reiterate these. We are committing to 2 to 2.5 revenue growth per year over the next five years with 20 to 30 per cent of revenue growth from new services over the next three years. Our 2010 cost structure will be no higher than the annualised number of the first half of the fiscal year 2006, that is, 1 January 2006 that we reported in February. By fiscal year 10 we expect EBITDA margins will have recovered between 50 and 52 per cent.

We will also have 6000 to 8000 fewer employees and contractors on our payroll in three years’ time. We’re going to spend $2.5 billion to $3.5 billion in capital over and above our original plan in the next three years to transform the business. After transforming the business we expect capex relative to sales to fall to 12 per cent of revenues and from then on to grow in proportion to future revenue growth. We expect to generate free cash in the order of 6 to 7 billion by 2010. I hope that what I’ve said today helps you understand more of what we’re doing with our transformation. I now thank you very much for listening and turning on to the audience for questions.

Q: What EPS could be inferred in 2010 given the cash flow of 6 to 7 billion.


ASX 16/05/06				TAREK ROBBIATI

~~Telstra~~MR ~~Corporation~~ROBBIATI: ~~Limited~~The ~~and~~question ~~controlled~~is, ~~entities~~what ~~Preliminary~~EPS ~~final~~would ~~report~~be inferred in 2010 given the cash flow of 6 to 7 billion. In the EPS calculations there are many things that come in. At this stage we have not issued such a precise guidance. We prefer to guide investors on the 6 to 7 billion number that I gave you before, because we think it’s a more appropriate view to look at the business today. It’s always better to talk in terms of free cash flow because, as you know, whenever you talk about EPS you have other elements that come in like depreciation, et cetera. At this stage we are not willing to provide any guidance on an EPS level. We stick to the 6 to 7 billion we provided on the cash flow basis.

~~Telstra~~Q: ~~Group~~(Indistinct)

						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

MR ROBBIATI: The question is, how can we defend our market against voice over IP, the voice over internet protocol? Well, voiceover IP is a promising technology. It is no doubt something that we have absolutely to be fully aware of. Having said so, you have to look at the whole suite of services. Let’s not forget that voice over IP provides do not, for instance, offer emergency 000 services and they have to run over an infrastructure provided by a telco that does cover these. So it is not the only solution that will be the panacea for the industry. It is just one set of services that we have to be very aware of and we are aware of, but it’s not going to be the only game in town.

~~The~~Let’s ~~above~~not ~~statement~~forget ofalso ~~changes~~that into ~~shareholders’~~operate ~~equity~~a isvoiceover anIP ~~extract~~network ~~from~~you ~~our~~need ~~full~~an ~~financial~~IP core network. ~~report~~I talked about that before. ~~Refer~~We toare ~~the~~preparing 30Telstra ~~June~~for an IP core network. We are investing substantial amounts of money, we talked about $2.5 ~~2005~~billion ~~financial~~to ~~report~~$3.5 billion, ~~lodged~~part of ~~with~~which ~~this~~goes ~~document~~into ~~for~~building ~~the~~an ~~detailed~~IP core network. So we are taking steps in that sense ~~notes~~because towe ~~this~~see ~~statement~~there is a cost advantage. And some operators around the world have already done that.

Q: Can you outline what you are doing for training for technicians and other qualified staff in the next five years, please, at grass level and at graduate level, please.

MR ROBBIATI: I’m glad you’re asking the question because it’s always hard to put on a chart that you’re letting 6000 to 8000 employees go without changing the way people do their jobs on a day-to-day basis. We are investing very heavily in training. All our technicians – we have created a training academy and we are investing more than $200 million in training our field force to make sure that they are (a) equipped with the latest technology, but also that they are aware about the latest practices that they have to employ in operations to actually do their job properly. So this is a pretty substantial investment on any benchmark you may want to pick worldwide. It’s 200 million on training just for the field force is a respectable sum.

Q: (Indistinct)


ASX 16/05/06				TAREK ROBBIATI

Telstra Corporation Limited and controlled entities		Preliminary final report
Appendix 4E		Year ended 30 June 2005

MR ROBBIATI: We said 6000 to 8000 people over three and then 12,000 over five. We have identified groups of individuals in the company that will be asked to leave, but this is all I can say at this stage. We haven’t identified more specifically who these people are.

1.Q: ~~Details of dividend or distribution plans in operation~~(Indistinct)

~~During~~MR ~~fiscal~~ROBBIATI: ~~2005~~Yes, ~~and~~but ~~fiscal~~don’t ~~2004~~forget it’s unfortunate, it’s very, very unfortunate, madam, that we ~~had~~have noto take that step. You would want never to ~~dividend~~take such a step, but the reality is that unfortunately when your cost structure is not commensurate to your revenues – and this is what I kind of showed at the beginning of the presentation – then you have to take tough medicine. If we don’t take these steps it’s going to be a lot worse moving forward. I can tell you from my own experience I worked in a large telco in Europe, which I won’t give the name. You have vast elements of the cost structure which remain unaddressed. From my perspective it remains a time bomb waiting to explode. So as soon as you know something in this business or ~~distribution~~in ~~reinvestment~~any ~~plans~~other business, as soon as you realise that your costs are outgrowing your revenues you have to take those steps. As painful as these steps are, they’re less painful to be taken today than if they were to be taken in the future and having missed on the fixes ~~operation~~that you can implement today.

2.Q: ~~Net tangible assets per security~~(Indistinct)

	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

MR ROBBIATI: The question is, now many employees in percentage of the workforce? We have approximately 52,000 employees and contractors today in Telstra. So 12,000 over 52,000 over five years that’s what you’re talking about.

3.Q: ~~Details of entities which control has been~~(Indistinct) ~~gained or lost during the period~~

~~Entities~~MR ~~which~~ROBBIATI: ~~control~~The ~~has~~question ~~been~~is, ~~gained~~could ~~during~~you provide any comments about Telstra’s ongoing role with Foxtel. We have an ongoing relationship with Foxtel and PBL. We continue to value this relationship. We are operating the pay-TV ~~period~~network together with them. So far so good; it’s business as usual, nothing more to add on that I’m afraid.

~~During~~Q: ~~fiscal~~Can ~~2005~~I ask something relating to the morale of the employees with the knowledge that the overall employment future seems to somewhat denigrated. Does this emphasise any great morale problem, weyou’ve ~~gained~~got ~~control~~a human resources nightmare or something? I’m just wondering do you have any emphasis on getting rid of older people, which seems to be somewhat highlighted in the news today? The other thing is if the future ~~following~~seems ~~significant~~to ~~entities:~~be somewhat dim and if you can say 6 to 8 thousand – percentage-wise for 52,000 I suppose is within reasonable expectation. But do you detect any sort of downgrade in attitudes of employees who say, “What the hell am I working for?” Is that a reasonable question?

~~KAZ~~ASX ~~Group~~16/05/06 ~~Limited~~ TAREK ROBBIATI

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

MR ROBBIATI: It is a reasonable question of course, you know. We are making sure that morale is something we monitor. Let’s not underestimate how radical the transformation is. The transformation that we’re talking about is enormous, simplifying networks, reducing 1252 IT systems by 80 per cent, changing the work practices, as your colleague has asked before, investment in training and in tools. The transformation is radical and therefore it is very important that we mobilise our colleagues as much as possible to achieve the outcomes that we are asking. We cannot do this by being four, five people in the headquarters. Everybody is playing his role. What we are detecting is that people are very engaged in this, they are really thinking that what we are doing is the right thing for the business. There is a very strong esprit de corps in the company today and we’re all driving in one direction.

4It’s only like that that we will be able to deliver our transformation. ~~Details~~In any big transformation plan and change plan you do have to create the sense of formulisation, ~~investments~~and inwe ~~joint~~have ~~ventures~~invested time and time again and every day when I speak with my ~~associated~~team ~~entities~~I spend an awful lot of time explaining to them, “This is what we’re doing, this si why we’re doing it.” Every manager in the company, John Stanhope, everybody spends time reiterating the purpose of what we’re trying to do.

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

Q: Have you or the CEO any further information about the eventual takeover of the major part of the government shares? The government at present moment is owning 51 per cent. Right?

#		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.

MR ROBBIATI: Yes.

Q: So obviously they’ve got the major vote in everything we do.

MR ROBBIATI: The government has – yes, it’s true the government owns more than 51 per cent of the shares of Telstra, but Telstra is a company with its own board and its own governance and we are operating in the frame of the law as far as the Telstra Corporate Act is concerned, and we are as management working for all shareholders and not just the government.

Q: (Indistinct)

MR ROBBIATI: The government is selling its own shares. The company doesn’t have anything to do with the government selling its own shares. We are not issuing shares for funding the transformation. We can fund the transformation with the cash that we generate each year. So these are two separate matters.

Q: (Indistinct)

MR ROBBIATI: If T3 doesn’t take place, is Telstra going to procure some of the shares, are we going to buy some of these shares from the government. That’s the question you’re asking. This is not something that is envisaged at this point in time.


ASX 16/05/06				TAREK ROBBIATI

Telstra Corporation Limited and controlled entities		Preliminary final report
Appendix 4E		Year ended 30 June 2005

Q: (Indistinct)

4MR ROBBIATI: I can refer you — because you read the slides very well I can also refer you to this slide. ~~Details~~But ofI ~~investments~~will inanswer ~~joint~~your ~~ventures~~question and not really leave ~~associated~~the ~~entities~~question ~~(continued)~~unanswered. We have given guidance for a fully franked dividends of 28 cents per share. Now, as you know, we have to give due consideration to some financial estimates as we decide on those dividend payments out. The board always evaluates the appropriateness of any dividend moving forward. For the moment it is our intent to pay 28 cents per share until 2008, as you see on the slide. There are two asterisks there that say subject to appropriate board considerations.

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		—

Q: (Indistinct)

~~Unless~~MR ~~noted~~ROBBIATI: ~~above~~It’s the same answer you’re going to get. If the financial parameters permit and the board gives a due consideration, ~~all~~you ~~investments~~know, ~~are~~this ~~incorporated~~is inwhat ~~Australia~~we have to go through, dividends will follow based on that.

~~During~~Q: ~~fiscal 2005, we have had no significant~~(Indistinct) ~~acquisitions or significant disposals of associated entities.~~

~~Share~~MR ROBBIATI: What’s plan B? I think that the one thing not to forget Telstra is a company in its own right and has a full suite of ~~joint~~assets. ~~venture~~We ~~entities~~think that it’s ~~and~~very, ~~associated~~very important that we seek ~~entities~~the regulatory outcome, which is that we must be able to invest to provide a return to our shareholders. This is irrespective of what network you’re ~~net~~talking ~~losses/~~about. ~~(profits)~~The reason why this is is that if not, you are stifling the growth prospects of the company. No matter whether you’re investing on mobile or fixed or any network you may choose, you need to have certainty about returns. Those returns have to be dependent on our ability to recover our costs. So it’s a point of principle that we’re taking on regulation.

	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

Let’s not forget if you follow the telecom industry how capital-intense it is. People tend to forget this, but when you look at the capex to sales ratios in telecoms and compare it, if you want, to a utility company, a gas provider or an electricity provider, that ratio is much higher. Capex to sales ratio on normalised telecoms is where we’re going to get to is this 12 per cent that you see here on this slide. In utilities companies the life span of the investment is much longer because you don’t have the same technological obsolescence that you have in telecoms. Therefore, knowing that it is becoming absolutely crucial to have some sort of understanding that returns is what drives your investment decision.

#Q: 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.(Indistinct)

MR ROBBIATI: As I said to you, you can hypothesise as much as you want but it’s a point of principle. Why would we invest without having the ability to generate some returns for our shareholders? This doesn’t make sense, irrespective of what plan you choose, B, G, F, whatever you want.


ASX 16/05/06				TAREK ROBBIATI

Telstra Corporation Limited and controlled entities		Preliminary final report
Appendix 4E		Year ended 30 June 2005

Q: When you sort out your troubles with the ACCC, how do you plan to roll out Fibre to the Node? Do you just plan to do it in selected areas or will this be a nationwide event?

5MR ROBBIATI: Right now the discussions with the ACCC are proceeding fairly well and I think decisions about rollout are all subject to that outcome. ~~Any~~So ~~other~~we ~~significant~~don’t ~~information~~have ~~needed~~any byparticular ancommitment ~~investor~~as far as rolling FTTN in one area relative to ~~make~~another. anIt ~~informed~~all depends ~~assessment~~on the outcome of the discussions with the ~~entity~~ACCC, because, you see, a lot of things can happen in those discussions. A lot of things can be altering the outcome and we cannot today make such decisions without taking the outcome as a package. Once that is known and it’s ~~financial~~set ~~performance~~in print, then we will make those decisions.

~~Statement~~Q: ~~of financial position~~(Indistinct)

WeMR ~~continued~~ROBBIATI: toI’m ~~maintain~~glad ayou’re ~~strong~~asking ~~financial~~the ~~position~~question. ~~with net~~If ~~assets~~you ofgo ~~$14,881 million,~~back ~~compared~~to ~~with~~this ~~net~~chart ~~assets~~here you ofcould ~~$15,361 million~~see asthat atthe 30last ~~June 2004.~~item ~~The~~on ~~decrease~~the inright is labelled “restructuring and redundancy ~~net~~provision” ~~assets~~and bythis ~~$480 million~~is ~~comprised~~where anit ~~increase~~will inbe ~~total~~taken. In ~~liabilities~~essence, ofif ~~$1,797 million,~~you ~~offset~~look byat anthe ~~increase~~guidance ~~in our~~of ~~total~~15 ~~assets~~to of20 ~~$1,317 million.~~per cent

~~The~~Q: ~~increase in total liabilities of $1,797 million was~~(Indistinct) 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.

MR ROBBIATI: The ~~increase~~question inwas, ~~total~~what ~~assets~~is ofthe ~~$1,317 million~~ratio ~~was~~corresponding to the ~~primarily~~redundancies ~~due~~and the potential reduction of staff of 6 to 8 thousand people. The chart gives you a hint about what the ~~following~~answer ~~movements~~is ~~during~~and you can see that you have one element in the ~~year:~~calculation here that shows that the restructuring and redundancy provision would dilute EBIT by 6 per cent. So that’s the answer.

•Q: ~~Cash~~I ~~assets~~noticed ~~increased~~all bythose ~~$853~~redundancies ~~million~~you ~~partially~~had ~~due~~up tothere ~~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~~screen, ~~plant~~I ~~and~~had ~~equipment~~an ~~increased~~experience ~~by $488 million, largely due~~ to ~~the~~get serviced ~~recognition~~by ofTelstra. ~~our~~So ~~share~~I ofrang ~~third~~up ~~generation~~Telstra. ~~(3G)~~They ~~radio~~referred ~~access~~me ~~network~~to ~~assets~~a ~~acquired~~call ascentre ~~part~~and ofI ~~the~~rang ~~formation~~that ofcall centre. aThey ~~partnership~~said, ~~with~~“We’ll ~~Hutchison~~get 3Gsomebody ~~Australia~~to ~~Pty~~ring ~~Ltd;~~you •back.” ~~Intangibles~~A —company ~~goodwill~~called ~~increased~~Transfield byrings ~~$183~~me ~~million~~ back to ~~$2,287~~make ~~million (2004: $2,104 million) as~~ a ~~result~~service ofdate ~~goodwill~~and ~~acquired~~then ~~on our investment acquisitions in~~ the ~~KAZ~~service ~~Group~~man ~~(KAZ),~~that ~~the~~arrived ~~Damovo~~was ~~Group (Damovo) and the PSINet Group (PSINet); • Non current — other assets increased by $282 million to $2~~from,~~610~~ ~~million~~say, ~~mainly~~ABC ~~due to an arrangement where our joint venture entity~~company communications, ~~Reach~~those ~~Ltd~~guys ~~(Reach),~~were ~~allocated~~ex-Telstra ~~its~~employees. ~~international~~So ~~cable~~looking ~~capacity~~at ~~between~~that usredundancy ~~and~~it ~~our~~seemed ~~joint~~to be ~~venture~~the ~~partner,~~poor ~~PCCW~~old ~~Limited~~servicemen ~~(PCCW),~~went asaround anin ~~indefeasible right of use agreement with~~ a ~~value~~large ofcircle. ~~$216~~I’m ~~million.~~just Aswondering ~~consideration,~~are we ~~discharged~~paying ~~Reach’s~~more ~~liability~~now for ~~to us under~~ the ~~capacity~~service ~~prepayment,~~for ~~previously~~an ~~recognised~~ex-Telstra ~~within~~employee ~~non current receivables;~~ and •is ~~Non-current~~Telstra ~~receivables~~now ~~decreased~~only bybecoming ~~$500~~a ~~million~~utility ~~to $240 million (2004: $740 million) due to the termination of the capacity prepayment~~ and ~~the~~not ~~movement in our cross currency swaps portfolio to~~ a service ~~net payable position.~~company?

~~Share~~MR ~~buy-back~~ROBBIATI: No, no and no. Telstra is not a utility company, it’s a service business. Maybe you’re right, our service is not perfect and we have to improve it, but we’re not a utility company. As to whether redundancies go full circle to contractors, there is – whenever you lay off someone who has a certain set of skills it is not unlikely that you see the same person who has the same set of skills emerging in another organisation that services the industry as a whole. Telstra has been servicing and representing the telecom industry in this country for a very, very long time. That’s why you run up into this. But there was another element in your question that was interesting, which is

OnASX ~~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.~~16/05/06 ~~per~~TAREK ~~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~~ ROBBIATI

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

are costs coming down knowing that some of the work goes outside the company and are we not paying too much for contractors.

6It is a very important question you’re asking and there is absolutely in our view the need to make sure that we bring the cost trend back in line with where the revenues are. ~~Commentary~~All onthe measures we’re taking are to bring down the ~~results~~cost base to a point where you have a certain variable element of costs kicking in for a variable element of revenues kicking in. That’s where we’re driving towards. So we will push this quite hard, i.e. we will push the ~~period~~cost base down quite hard.

~~Statement~~Q: We’re seeing a lot in the media at the moment concerning an alliance which Austar is fashioning. Because there are technological issues involved, could you just explain what the nature of ~~Financial~~the ~~Performance~~challenge is and then how you propose to meet it?

~~Our~~MR ~~net~~ROBBIATI: ~~profit~~I’m ~~for~~not ~~the~~a ~~year~~believer ~~was~~in $4alliances in telecoms,~~447 million,~~ I’m really not. Let me be very clear ~~representing~~about anthis. ~~increase~~If you really look back at the history of 8the industry there is always a very nice news flow emerging from an announcement, an alliance, et cetera.0% onBut at the ~~prior~~end ~~year~~of the day, the proof is in the pudding and it’s ~~net~~really about what investment goes in, what services will be provided, how ~~profit~~can the various members of ~~$4,118 million~~the alliance differentiate among themselves. ~~Earnings~~When ~~before~~you ~~interest~~hit ~~and~~the ~~income~~differentiation ~~tax~~point ~~expense~~what ~~(EBIT) for~~happens ~~fiscal~~is ~~2005~~that ~~was~~you $7realise that this isn’t much differentiation,~~005~~ that players feel constrained by the ~~million~~alliance ~~representing~~more anthan ~~increase~~anything ofelse ~~6.8%~~and that therefore they want to be free to invest on ~~the~~their ~~prior~~own ~~year~~to ofachieve ~~$6,560 million~~their own returns and be able to differentiate and compete properly.

~~Total~~So ~~revenue~~that’s ~~(excluding~~why ~~interest~~every ~~revenue)~~time ~~for~~I ~~the~~hear ~~year increased~~anything byabout ~~6.5%~~an toalliance ~~$22,657 million~~I ~~(2004:~~take ~~$21,280 million).~~this ~~Sales~~with ~~revenue was $22,161 million, representing~~ a ~~6.9% increase on the prior year sales~~ ~~revenue~~pinch of ~~$20,737 million~~salt. ~~Sales~~There ~~and~~are ~~total~~names ~~revenues included~~that ~~$548 million~~were ofvery ~~revenue~~familiar ~~generated~~to byus, ~~controlled entities~~Unisource wein ~~acquired~~Europe, ~~during the year. The entities~~large ~~acquired~~alliances ~~included~~at the ~~KAZ,~~time ~~Damovo~~of ~~and~~BT in the ~~PSINet~~90s. ~~The acquisition~~All of ~~KAZ~~these ~~expands~~have ~~our~~disappeared. ITAgain ~~services~~compete ~~capability,~~with your ~~complementing~~own ~~our~~means, ~~core~~invest ~~strength~~ in ~~telecommunications. Damovo~~your ~~improves~~own ~~our~~infrastructure ~~ability to provide advanced voice~~ and ~~data~~ ~~communication~~differentiate; ~~solutions,~~that ~~and~~is ~~PSINet~~the ~~assists~~name usof ~~in providing~~the ~~converged communication and technology services internationally~~game.

~~Excluding~~FACILITATOR: Tarek has been very generous with his time and his question and answers. We’re probably approaching the ~~impact~~close of ~~our~~proceedings. ~~newly~~We ~~acquired~~might ~~entities,~~have time for about three ~~revenue~~more ~~growth~~questions ~~was~~and ~~mainly~~then ~~attributable~~we’ll ~~to:~~probably wrap it up.

•Q: 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%.(Indistinct)

~~These~~MR ~~increases~~ROBBIATI: ~~have~~I ~~been~~hope ~~partially~~you ~~offset~~heard bythe aquestion, ~~decline~~it’s an important one. It says any company who inloses ~~PSTN~~statistically ~~revenues~~22 per cent of ~~$275 million~~its oremployee 3base stands to lose a lot of knowledge and what are you doing to counter that.4% You obviously have to develop new knowledge is the short answer to your question. ~~While~~This ~~PSTN~~is what ~~remains~~the atransformation ~~significant~~is ~~contributor~~about. toIf ~~our~~you ~~revenue~~are taking out network elements, ityou’re isreducing mobile ~~declining~~networks asfrom three to one, if you are also simplifying the ~~market~~IT ~~continues~~systems to ~~move~~the ~~towards~~extent ~~new~~we ~~technologies~~mentioned, then all the processes, all the work practices will have to ~~satisfy~~be ~~its~~redesigned. ~~telecommunications~~We are ~~requirements.~~investing

~~Mobile~~ASX ~~goods~~16/05/06 ~~and~~TAREK 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. ROBBIATI

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

in this big time. It’s part of the cost of transformation. On top of that we are also making sure that we are investing in our field force to make sure that they are equipped in knowledge, equipped in tools to be able to do their jobs on a day-to-day basis. The knowledge shift is just going to be important. Things that are done today in certain ways will not be done tomorrow. That’s what we have to keep in mind.

6.Q: ~~Commentary on the results for the period~~ (~~continued~~Indistinct)

~~Investor~~MR ~~return~~ROBBIATI: Sir, I would love to have many discussions with my mother, but unfortunately she passed away 10 years ago. So it’s a bit difficult. But let me just give you an analyst’s perspective about this. When I was an analyst I was asked exactly the same question; would you invest in shares you’re having a bi-rating on or would you not. It’s a case of damn if you do it and damned ~~other~~if ~~key~~you ~~ratios~~don’t ~~(continued)~~– pardon me the expression – because if you don’t invest, then people retort to you you’re not putting your money where your mouth is. If you do, you’re accused of conflict of interest. So from my perspective, I just simply steer away from this. I’m not investing in any of the shares of my employer, I don’t think it’s appropriate. Simply just as a matter of principle I’ve learned the lesson six years ago and I stick to what I’ve learned.

WeQ: ~~have declared a final fully franked dividend of 14 cents per share~~ (~~$1,742 million~~Indistinct) ~~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:

•MR ~~Return~~ROBBIATI: Two questions on ~~average~~your ~~assets~~side. —The ~~2005:~~first 20one is, is it wireless or FTTN, basically one or the other.4% ~~(2004:~~That 19was the first part of the question.~~4%)~~ The second question is, what is the node? Don’t forget that we will want to push solutions that are platform-independent. So it’s not one or the other. It could be both in some cases and it could be just one in one case, depending on what the customers truly want. So it’s not – there is no offsetting and hedging between investments in platforms. Both provide different services that can be integrated and that provide value to customers. The second part of your question is, what is a node? The best way I can picture this for you is the green street cabinets that you’re used to here in Australia. It’s very familiar in Europe as well, is when you walk past a street corner you will find a green cabinet that has a number on it that says “dial 133-something” if you think that there is a problem with the apparatus.

•So ~~Return~~what onit ~~average~~means, ~~equity~~fibre —to ~~2005:~~the 29node, is that the fibre in theory gets down to that point.4% ~~(2004:~~That’s 26what we refer to the node, and it’s servicing an area which is around the perimeter, approximately one half, 2 kilometres around the perimeter of that green street cabinet that you can refer to.~~8%)~~

~~Return~~Q: ~~on average assets is higher in fiscal 2005~~(Indistinct) 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~~MR ~~information~~ROBBIATI: No. The question was, do you have coaxial cable going from the node to your house. No, we will not put coaxial cable from the node to your house because since you brought the fibre close to the customer premises the rest of the distance can be covered with copper and what is

~~For~~ASX ~~segment~~16/05/06 ~~reporting~~TAREK ~~purposes, the Telstra Group is organised along the following segments:~~ ROBBIATI

• 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

known as being ADSL IPD slams. So that’s the architecture you’re going to have.

6.Q: ~~Commentary on the results for the period~~ (~~continued~~Indistinct)

~~Segment~~MR ~~information~~ROBBIATI: ~~(continued)~~No, I’m not saying that we have reached agreement. I think that the discussions are progressing, they’re progressing well. You know, in those circumstances it’s never done until it’s done. There is no way you can predict how long it will take I’m afraid.

~~Telstra~~FACILITATOR: ~~Wholesale~~Just ~~sales~~one ~~revenue~~more ~~increased~~question bydown ~~11.7% to $2,940 million in fiscal 2005 driven by~~ the ~~growth~~front ~~in the number of local service customers and the demand for broadband services~~here. ~~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~~Q: ~~Wholesale~~Just ~~EBIT~~to ~~increased~~return ~~by 9.7%~~ to ~~$2,973 million~~the invoiceover ~~fiscal 2005 driven by sales revenue growth~~IP, ~~partly~~ ~~offset~~I byunderstand anBritish ~~increase~~telecom inis ~~expenses.~~going ~~The expense~~entirely ~~growth~~over 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~~Internet. inIt ~~staff numbers~~surprised ~~required~~me tothat ~~support~~you ~~the~~hadn’t ~~significantly~~included ~~higher~~that ~~than planned volumes of access and broadband customers, as well as further development~~ in~~, and the expansion of, the~~ ~~wholesale~~your ~~market.~~suite ~~In addition, total IT professional services costs increased due to the revised contract conditions for system support and increased program~~ of ~~work~~ toofferings ~~support~~that ~~the~~you ~~revenue~~have ~~growth and operational efficiency~~here.

~~Other~~MR ~~information~~ROBBIATI: We can start a very long debate about British telecom because I’ve lived in the UK for 15 years and I could tell you everything about them having scrutinised the company at length. I think they are at a cross-roads. The company itself it at cross-roads. One thing that people tend to forget is how much of BT depends on wholesale revenue. If you look into analysts’ reports you will see that more than 60 per cent of BT’s value is in wholesale. That value is coming down very, very fast. So they don’t have much choice. They are pushing and building an NGN network but I think from my perspective, having seen how the market has evolved, this has been done way too late. They are thinking about their 21 century network maybe five years behind schedule. I’m not saying it is five years behind schedule, I’m saying their thinking is five years behind when it should have been relative to where the market maturity is.

NoThey ~~significant~~don’t ~~events~~ have ~~occurred~~much ~~after~~choice ~~balance~~given ~~date~~where they stand today and the vulnerability of the business to push voiceover IP. But, by the way, we’re not saying we’re not pushing voiceover IP, I never said that. We are building an IP core precisely because we know it’s coming. We will be ready for it. All I’m saying is don’t think that voiceover IP is the ~~year~~panacea ~~ended~~and 30that ~~June 2005~~will provide the ultimate solution from a customer standpoint. It is just one product, ~~other~~one ~~than:~~feature, albeit important, that will be part of the future, but not the whole future.

~~Dividend~~FACILITATOR: ~~declaration~~Many, many thanks. That’s probably the most generous Q and A time we’ve ever had at investor hour. So I’d like to thank you for your endurance there. If everyone could put their hands together for our guest speaker today.

OnMR 11ROBBIATI: ~~August 2005,~~Thank weyou ~~declared~~very ~~a fully franked final dividend of 14 cents per ordinary share and a fully franked special dividend of 6 cents per ordinary share~~much. 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.

AASX ~~provision~~16/05/06 ~~for~~TAREK ~~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.~~ ROBBIATI

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
22 May 2006		Office of the Company Secretary
Appendix 4E		Year ended 30 June 2005
The Manager		Level 41
		242 Exhibition Street
Company Announcements Office		MELBOURNE VIC 3000
Australian Stock Exchange		AUSTRALIA
4th Floor, 20 Bridge Street
SYDNEY NSW 2000		Telephone 03 9634 6400
		Facsimile 03 9632 3215

7.ELECTRONIC ~~Statement about the audit status~~LODGEMENT

~~Our~~Dear ~~preliminary~~Sir ~~final~~or ~~report is based on the Telstra~~Madam ~~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.Appendix 3X–Initial ~~Other~~Director’s ~~factors~~Interest ~~likely to affect results in the future~~Notices

~~Adoption~~In ofaccordance ~~International~~with ~~Financial~~the ~~Reporting~~listing ~~Standards~~rules I enclose an Appendix 3X — Initial Director’s Interest Notice for Mr John Zeglis and Mr Peter Willcox.

~~Australian~~Yours ~~entities reporting under the Corporations Act~~sincerely 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~~Fiona ~~that we restate our comparative financial~~Mead ~~statements~~Acting ~~using~~Company ~~A-IFRS, except for AASB 132: “Financial~~Secretary ~~Instruments:~~On ~~Disclosure~~behalf ~~and~~of ~~Presentation”~~Douglas ~~and AASB 139:~~Gration ~~“Financial~~Company ~~Instruments: Recognition and Measurement”~~Secretary ~~where comparative information is not required to be~~ ~~restated.~~

~~Currently~~Telstra weCorporation ~~provide~~Limited ~~two~~ACN ~~years~~051 of775 ~~comparative~~556 ~~financial information~~ABN in33 ~~our~~051 ~~year~~775 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. 556

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

Appendix 3X
Initial Director’s Interest Notice

8Rule 3. ~~Other factors likely to affect results in~~19A.1 ~~the future (continued)~~

~~Adoption of International Financial~~Appendix 3X ~~Reporting Standards (continued)~~

~~(a) AASB~~Initial 2:Director’s ~~“Share-Based~~Interest ~~Payment” (AASB 2) (continued)~~Notice

OnInformation ~~adoption~~or ofdocuments ~~AASB~~not 2available wenow ~~will~~must ~~recognise~~be angiven ~~expense for all share-based remuneration determined with reference~~ to ~~the~~ ~~fair~~ASX ~~value~~as ofsoon ~~the~~as ~~equity instruments issued~~available. ~~The~~ ~~fair~~Information ~~value~~and ofdocuments ~~our~~given ~~equity instruments will be calculated using an appropriate valuation technique~~ to ~~estimate~~ASX ~~the price~~become ~~of those equity instruments in an arm~~ASX’s ~~length transaction~~property ~~between~~and ~~knowledgeable,~~may ~~willing parties. The fair value calculated in accordance with AASB 2 will~~ be ~~charged~~ ~~against~~made ~~profit over the relevant vesting periods, and adjusted as required by the standard~~public.

~~Under~~Introduced 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)30/9/2001. ~~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.


Name of entity		Telstra Corporation Limited

ABN		33 051 775 556

We ~~own 100% of~~ (the ~~equity~~entity) ofgive ~~Telstra~~ASX ~~Growthshare Pty Ltd,~~ the ~~corporate~~following ~~trustee~~information ~~for~~under ~~the~~listing ~~Telstra~~rule ~~Growthshare Trust, which administers our share based payment plans~~3.19A.1 ~~Under current~~and ~~AGAAP~~as ~~we do not control or significantly~~agent ~~influence~~for the ~~trust,~~director asfor ~~beneficial ownership and control remains with~~ the ~~employees~~purposes ~~who~~of ~~participate~~section in205G ~~the~~of ~~share plans, administered by~~ the ~~Trustee~~Corporations ~~on their behalf~~Act.

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:


Name of Director		JOHN D ZEGLIS

Date of appointment		17 May 2006

•Part 1 ~~elimination~~— ofDirector’s ~~the~~relevant ~~loan~~interests ~~receivable from the Telstra Growthshare Trust ($65 million); • reduction~~ in ~~share~~securities ~~capital~~of towhich ~~reflect~~ the ~~shares~~director ~~held~~is 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).~~registered holder

~~Other~~In ~~assets~~the ~~and~~case ~~liabilities~~of ~~held~~a bytrust, ~~the~~this ~~Trust~~includes ~~are insignificant~~interests toin the ~~Telstra~~trust ~~Group~~made ~~and~~available ~~Telstra~~by ~~Entity.~~the responsible entity of the trust

~~Our~~Note: ~~interpretation~~In ofthe ~~AASB~~case 2of isa ~~that~~company, ~~shares~~interests ~~issued~~which ~~under the~~come ~~Telstra~~within ~~Employee~~paragraph ~~Share Ownership Plans~~ (~~TESOP 97 and TESOP 99~~i), of ~~in conjunction with~~ the ~~non-recourse loans,~~ ~~are~~definition toof be“notifiable ~~accounted~~interest ~~for~~of ~~as options. As~~ a ~~result,~~director” ~~the outstanding~~should 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~~disclosed ~~from~~in ~~share~~this ~~capital on transition to A-IFRS~~part.

WeNumber ~~own~~& ~~100%~~class of ~~the equity of Telstra ESOP Trustee Pty~~securities 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~~NIL ~~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~~ See chapter 19 for defined terms. 11/3/2002 Appendix 3X Page 1

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

Appendix 3X
Initial Director’s Interest Notice

8.Part ~~Other~~2 — ~~factors~~Director’s ~~likely~~relevant tointerests ~~affect~~in ~~results~~securities in of which the ~~future~~director ~~(continued)~~is not the registered holder

~~Adoption~~In the case of ~~International~~a ~~Financial~~trust, this includes interests in the trust made available by the responsible ~~Reporting~~entity ~~Standards~~of ~~(continued)~~the trust

~~(b) AASB~~Name 3of holder & nature of interest Number & class of Securities Note: ~~“Business~~Provide ~~Combinations”~~details ~~(AASB~~of 3)the ~~(continued)~~ circumstances giving rise to the relevant interest. NIL

~~Comparative~~Part ~~information~~3 — Director’s interests in contracts

~~The~~Note: ~~prohibition~~In ofthe ~~amortisation~~case of ~~goodwill~~a ~~will have the effect of reducing expenses and therefore improving reported profits~~company, ~~subject~~interests towhich ~~any~~come ~~impairment~~within ~~charges~~paragraph 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~~ii)~~. The~~ of ~~AGAAP amortisation charge for~~ the ~~Telstra Group for~~ ~~the~~definition ~~year~~of ~~ended~~“notifiable 30interest ~~June 2005~~of ~~was~~a ~~$145 million~~director” ~~(Telstra Entity:~~should ~~$4 million), which will~~ be ~~reversed~~disclosed ~~for~~in ~~A-IFRS purposes~~this part.

InDetail ~~addition,~~of ~~the~~contract ~~amortisation~~NIL ~~charge~~Nature ~~for~~of ~~notional goodwill~~interest ~~that~~NIL ~~has~~Name ~~previously been included in the share~~ of ~~net~~registered ~~loss~~holder ~~from~~(if ~~joint~~issued ~~venture~~securities) ~~entities~~NIL ~~and associated entities will cease~~No. ~~The~~and ~~cumulative~~class ~~effect~~of onsecurities ~~the Telstra Group financial position at 30 June 2005 will be~~ to ~~increase~~which ~~investments~~interest ~~accounted~~relates 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. NIL

~~The~~+ ~~adoption~~See ofchapter ~~AASB~~19 ~~3 results in adjustments being recognised~~ for ~~acquisitions~~defined ~~completed subsequent to transition date in the 12 months to 30 June 2005~~terms. ~~This means~~Appendix ~~that~~3X ~~deferred~~Page ~~tax~~2 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. 11/3/2002

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

Appendix 3X
Initial Director’s Interest Notice

8Rule 3. ~~Other factors likely to affect results in~~19A.1 ~~the future (continued)~~

~~Adoption of International Financial~~Appendix 3X ~~Reporting Standards (continued)~~

~~(d) AASB~~Initial ~~112:~~Director’s ~~“Income~~Interest ~~Taxes” (AASB 112) (continued)~~Notice

~~Comparative~~Information ~~information~~or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX’s property and may be made public.

~~The~~Introduced ~~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~~/9/2001.

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


Name of entity		Telstra Corporation Limited

ABN		33 051 775 556

~~Under~~We ~~A-IFRS,~~(the weentity) ~~will~~give ~~deem~~ASX the ~~carrying~~following ~~value~~information ofunder ~~our property,~~listing ~~plant~~rule 3.19A.1 and ~~equipment~~as toagent befor the ~~cost~~director ~~from~~for the ~~date~~ purposes of ~~transition~~section 205G of the Corporations Act.

Comparative information


Name of Director		PETER J WILLCOX

Date of appointment		17 May 2006

OnPart 61 ~~December 2004,~~— weDirector’s ~~acquired~~relevant ainterests ~~50% interest~~ in ~~the~~securities ~~3G Radio Access Network (RAN) assets~~ of ~~Hutchison~~which ~~3G Australia Pty Ltd (H3GA) for $450 million, payable over 2 years. Due to~~ the ~~deferred~~director ~~payment~~is ~~terms, under current AGAAP our property, plant and equipment balance increased by $428 million, representing~~ the ~~present value of the~~registered ~~purchase price calculated using our incremental borrowing~~holder ~~rate. AASB 116 requires that a discount rate specific to the asset be used, rather than our incremental borrowing rate.~~

~~Under~~In ~~AGAAP,~~ the ~~release~~case of ~~interest~~a ~~associated~~trust, ~~with~~this ~~the unwinding~~includes ofinterests in the ~~present~~trust ~~value~~made ~~discount~~available isby ~~being capitalised as part of property, plant and equipment until~~ the ~~assets are installed ready for use. Under~~responsible ~~A-IFRS~~entity ~~the release~~ of ~~interest~~the ~~will be expensed as~~trust ~~incurred.~~

~~For~~Note: ~~the~~In ~~Telstra Group, this change in~~ the ~~discount~~case ~~rate and capitalisation~~ of ~~interest will result in~~ a ~~decrease in our property~~company, ~~plant~~interests ~~and~~which ~~equipment~~come ofwithin ~~$38 million, decrease~~paragraph ~~in current and non current deferred liabilities of $10~~(i) ~~million, and decrease in deferred tax liability~~ of ~~$12 million~~ ~~as at 30 June 2005. Interest expense of~~ the ~~Telstra~~definition ~~Group~~of ~~for~~“notifiable ~~the~~interest ~~year~~of ~~ended~~a 30director” ~~June 2005~~should ~~will increase by $28 million, and income tax expense will decrease by $12 million. There will~~ be nodisclosed ~~impact~~in onthis ~~the Telstra Entity~~part.

~~(f) AASB~~Number ~~119:~~& ~~“Employee~~class ~~Benefits”~~of ~~(AASB 119)~~securities

~~Under current AGAAP, we do not recognise an asset or~~NIL ~~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~~See ofchapter ~~A-IFRS,~~19 ~~AASB~~for 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)~~terms. ~~The~~11/3/2002 ~~Telstra~~Appendix ~~Entity adjustment~~3X ~~will~~Page ~~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.~~ 1

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

Appendix 3X
Initial Director’s Interest Notice

8.Part ~~Other~~2 ~~factors~~— ~~likely~~Director’s torelevant ~~affect~~interests ~~results~~ in securities of which the ~~future~~director ~~(continued)~~is not the registered holder

~~Adoption~~In the case of ~~International~~a ~~Financial~~trust, this includes interests in the trust made available by the responsible ~~Reporting~~entity ~~Standards~~of ~~(continued)~~the trust

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


Name of holder & nature of interest			Number & class of Securities
Note: Provide details of the circumstances giving rise to the relevant interest.

Peter John Willcox Superannuation Fund			10,000 Ordinary Shares

OnPart ~~an ongoing basis, AASB 121 requires goodwill and fair~~3 ~~value~~— ~~adjustments~~Director’s ~~arising~~interests ~~on the acquisition of a foreign controlled entity to be expressed~~ in ~~the functional~~contracts ~~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~~Note: In the ~~transitional~~case ~~rules~~ of ~~AASB~~a 1company, weinterests ~~will~~which become ~~taking advantage~~within paragraph (ii) of ~~an exemption that permits~~ the definition ~~resetting~~ of ~~the~~ ~~FCTR~~“notifiable tointerest ~~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~~director” ~~to opening~~should ~~retained~~be ~~profits~~disclosed ofin this ~~amount~~part. ~~There will be~~ ~~no adjustment related to the Telstra Entity.~~

~~Translation~~Detail ~~differences~~of incontract ~~relation~~NIL toNature ~~our~~of ~~foreign controlled~~interest ~~entities~~NIL ~~subsequent~~Name toof ~~transition~~registered toholder ~~A-IFRS will~~(if ~~continue~~issued tosecurities) beNIL ~~recorded in the FCTR~~No. ~~The~~and ~~gain~~class ~~or loss on a future disposal~~ of asecurities ~~foreign controlled entity will exclude the translation differences that arose before the date of transition~~ to ~~A-IFRS~~which ~~and~~interest ~~the resetting~~relates ~~of the FCTR.~~ NIL

~~Under~~+ ~~the~~See ~~transitional~~chapter ~~rules~~19 offor ~~AASB~~defined 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 acquisitionterms. ~~The financial~~Appendix ~~impact~~3X ofPage ~~restating~~2 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). 11/3/2002

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
25 May 2006		Office of the Company Secretary
Appendix 4E		Year ended 30 June 2005
The Manager Company Announcements Office Australian Stock Exchange 4th Floor, 20 Bridge Street SYDNEY NSW 2000		Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA Telephone 03 9634 6400 Facsimile 03 9632 3215

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

~~Adoption~~Dear ofSir ~~International~~or ~~Financial~~Madam ~~Reporting Standards (continued)~~

~~(h) AASB~~Cash ~~128:~~Capital ~~“Investments~~Expenditure ~~in Associates” (AASB 128)~~Guidance ~~and AASB 131: “Interests in Joint Ventures” (AASB 131) (continued)~~

OnIn ~~transition~~accordance ~~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~~listing ~~prepayment as part of the transition to A-IFRS. The increase in our deemed investment balance in Reach will~~rules, ~~however,~~I beattach 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~~announcement ~~of $140 million to the FCTR~~ for ~~the translation~~release ~~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)~~market. ~~There~~ ~~will be no adjustment related to the Telstra Entity.~~

~~During~~Yours ~~the 2005 fiscal year we swapped our capacity~~sincerely 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~~Fiona ~~information~~Mead Acting Company Secretary On behalf of Douglas Gration Company Secretary

~~The cumulative effect on the~~ Telstra ~~Group~~Corporation ~~financial~~Limited ~~position~~ACN at051 30775 ~~June 2005 will be to decrease intangibles~~556 -ABN ~~other~~33 by051 ~~$216 million.~~775 ~~The Telstra Group share of net~~556 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).

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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.

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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.

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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.

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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.

Underlying1 total 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.

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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.

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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.

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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.

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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 101TM. 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.

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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.

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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.

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Telstra Corporation Limited and controlled entities

Intercarrier Services

Intercarrier services
	Year Ended 30 June 2005
	2005		2004		Change		Change
	(in $ millions)						%
Intercarrier services revenue		1,146		1,103		43		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.

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Telstra Corporation Limited and controlled entities

Hong Kong CSL

HK CSL	`
		Year Ended 30 June 2005
		2005		2004		Change		Change
		(in $ millions)						%
HKCSL revenue			734		726		8		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

TelstraClear
	Year Ended 30 June 2005
	2005		2004		Change		Change
	(in $ millions)						%
TelstraClear revenue		625		574		51		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.

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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.

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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	)

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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Telstra Corporation Limited and controlled entities

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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Telstra Corporation Limited and controlled entities

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

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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.

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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	)

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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
Total operating expenses before interest		15,652			(198	)		(6	)		(100	)		(405	)		(65	)		(82	)		(14	)		(870	)		14,782			14,720					(201	)		(227	)		(35	)		(463	)		14,257		6.3	%		3.7	%		525
EBIT		7,005			(89	)		6			(52	)		13			(6	)		11						(117	)		6,888			6,560					(88	)		227			(9	)		130			6,690		6.8	%		3.0	%		198
EBIT excl share of net loss from associates & joint venture entities		6,996			(89	)		6			(52	)		13			(6	)		11						(117	)		6,879			6,638					(88	)		227			(9	)		130			6,768		5.4	%		1.6	%		111
Net borrowing cost (*)		736												(2	)		(3	)								(5	)		731			712																	712		3.4	%		2.7	%		19
Profit before income tax		6,269			(89	)		6			(52	)		15			(3	)		11						(112	)		6,157			5,848					(88	)		227			(9	)		130			5,978		7.2	%		3.0	%		179
Tax (excl. unusuals effect) (*)		1,822									(18	)		1						3						(14	)		1,808			1,731		58			37						(3	)		92			1,823		5.3	%		(0.8	%)		(15	)
Profit after tax (bef. Outside equity interests)		4,447			(89	)		6			(34	)		14			(3	)		8						(98	)		4,349			4,117		(58	)		(125	)		227			(6	)		38			4,155		8.0	%		4.7	%		194

																	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
Outside equity interests in net (profit)/loss																											1																1			(100.0	%)		(100.0	%)		(1	)
Profit after tax		4,447			(89	)		6		(34	)		14		(3	)		8			(98	)		4,349			4,118			(58	)		(125	)		227		(6	)		38		4,156			8.0	%		4.6	%		193
Effective tax rate		29.1	%																					29.4	%		29.6	%															30.5	%		(0.5	%)		(1.1	%)
EBITDA margin on sales revenue		48.6	%																					49.4	%		49.1	%															49.8	%		(0.5	%)		(0.4	%)
EBIT margin on sales revenue		31.6	%																					32.1	%		31.6	%															32.3	%		(0.0	%)		(0.2	%)
Earnings per share (12512.62m shares)		35.5																						34.8			32.4																32.6			9.6	%		6.7	%

(i) refer page 42 for product reconciliation (ii) refer to page 27 for details of reclassification adjustments (iii) refer page 29 for details of reclassification adjustments Note: (*) Underlying interest & tax calculations represent management’s best estimates N/M refers to not meaningful

Page 39

Telstra Corporation Limited (ABN 033 051 775 556)

Normalisation Schedule Year Ended 30 June 2005

Adjustments to derive Underlying results

							Tax Effect	Profjt
	30 June 05		30 June 05		30 June 05		@30%	after
(A) Asset Sales ($m)	Proceeds		NBV		Profit		if applicable	tax
Land and Building sales		35		25		10			10
Investment sales		252		173		79			79
Total Property Plant and Equipment and Investment Sales		287		198		89			89
Total Asset/Investment Sales and other costs		287		198		89			89

	30 June 2005
(B) Diminution ($m)	Diminution
Other		6
Total Diminution		6

								Tax Effect			Profjt
	30 June 04		30 June 04		30 June 04			@30%			after
(A) Asset Sales ($m)	Proceeds		NBV		Profit			if applicable			tax
Land and Building sales		61		21		40						40
Investment sales		228		50		178			2			176
Total Property Plant and Equipment Sales		289		71		218			2			216
IBMGSA Exit Costs				130		(130	)		(39	)		(91	)
Total Asset/Investment Sales and other costs		289		201		88			(37	)		125

	30 June 2004
(B) Diminution ($m)	Diminution
Provision for Recoverablity of Reach loan		226
Other		1
Total Diminution		227

Income tax expense for the year ended 30 June 2004 includes a benefit of $58 million relating to our election to form a tax consolidation group from 1 July 2002. Under this legislation, certain tax values of a subsidiary’s (Telstra Multimedia Pty Ltd) assets are reset according to set allocation rules. The benefit reflects the increase in the future income tax benefit arising from these reset tax values.

Page 40

Telstra Corporation Limited (ABN 033 051 775 556)

Quarterly Data Quarter Ended 30 June 2005

	Q1		QTR PCPii			Q2		QTR PCPii			Half 1		YTD PCPii			Q3		QTR PCPii			Q4		QTR PCPii			Full Year		YTD PCPii			Q1		QTR PCPii			Q2		QTR PCPii			Half 1		YTD PCPii			Q3		QTR			Q4		QTR			YTD		YTD PCPii
Summary Underlying(I) Quarterly Data	Sep-03		Sep-03			Dec-03		Dec-03			Dec-03		Dec-03			Mar-04		Mar-04			Jun-04		Jun-04			Jun-04		Jun-04			Sep-04		Sep-04			Dec-04		Dec-04			Dec-04		Dec-04			Mar-05		Mar-05			Jun-05		Jun-05			Jun-05		Jun-05
Revenue
Mobiles
Mobile services		848		3.4	%		893		9.2	%		1,740		6.2	%		853		9.6	%		877		6.6	%		3,470		7.1	%		928		9.4	%		968		8.4	%		1,896		9.0	%		918		7.6	%		946		7.9	%		3,760		8.4	%
Mobile handsets		97		40.6	%		89		(12.7	%)		186		8.1	%		79		(24.0	%)		87		(20.9	%)		352		(8.8	%)		95		(2.1	%)		103		15.7	%		198		6.5	%		85		7.6	%		98		12.6	%		381		8.2	%
Total Mobiles		945		6.3	%		982		6.7	%		1,926		6.4	%		932		5.7	%		964		3.3	%		3,822		5.4	%		1,023		8.3	%		1,071		9.1	%		2,094		8.7	%		1,003		7.6	%		1,044		8.3	%		4,141		8.3	%
Internet and IP solutions		237		24.7	%		231		14.9	%		468		19.7	%		255		28.8	%		289		26.8	%		1,013		24.0	%		310		30.8	%		314		35.9	%		624		33.3	%		351		37.6	%		402		39.1	%		1,377		35.9	%
PSTN products
Basic access		791		3.4	%		819		3.5	%		1,610		3.5	%		795		2.2	%		832		11.2	%		3,237		5.0	%		853		7.8	%		847		3.4	%		1,700		5.6	%		831		4.5	%		831		(0.1	%)		3,362		3.9	%
Local calls		394		(0.8	%)		384		(3.8	%)		778		(2.3	%)		370		(3.6	%)		356		(8.0	%)		1,504		(4.0	%)		354		(10.2	%)		335		(12.8	%)		689		(11.4	%)		302		(18.4	%)		293		(17.7	%)		1,284		(14.6	%)
PSTN value added services		68		0.0	%		66		(10.8	%)		134		(5.0	%)		62		(12.7	%)		63		(7.4	%)		259		(7.5	%)		63		(7.4	%)		63		(4.5	%)		126		(6.0	%)		62		0.0	%		62		(1.6	%)		250		(3.5	%)
National long distance calls		292		2.5	%		286		(4.0	%)		578		(0.7	%)		278		(3.5	%)		265		(9.2	%)		1,121		(3.5	%)		265		(9.2	%)		262		(8.4	%)		527		(8.8	%)		244		(12.2	%)		242		(8.7	%)		1,013		(9.6	%)
Fixed to mobile		402		8.4	%		407		6.5	%		808		7.3	%		398		6.1	%		391		0.5	%		1,597		5.3	%		399		(0.7	%)		407		0.0	%		806		(0.2	%)		378		(5.0	%)		382		(2.3	%)		1,566		(1.9	%)
International direct		68		(15.0	%)		71		(12.3	%)		139		(13.7	%)		65		(11.0	%)		62		(12.7	%)		266		(13.4	%)		61		(10.3	%)		63		(11.3	%)		124		(10.8	%)		56		(13.8	%)		54		(12.9	%)		234		(12.0	%)
Total PSTN products		2,015		2.5	%		2,033		0.4	%		4,047		1.5	%		1,968		0.0	%		1,969		0.7	%		7,984		0.9	%		1,995		(1.0	%)		1,977		(2.8	%)		3,972		(1.9	%)		1,873		(4.8	%)		1,864		(5.3	%)		7,709		(3.4	%)
Data and Internet
Specialised Data		264		(2.9	%)		253		(7.3	%)		517		(5.1	%)		258		(5.1	%)		260		(7.5	%)		1,035		(5.7	%)		246		(6.8	%)		249		(1.6	%)		495		(4.1	%)		234		(9.3	%)		237		(8.8	%)		966		(6.7	%)
ISDN Products		239		(3.6	%)		234		(2.9	%)		473		(3.3	%)		229		1.8	%		225		(1.3	%)		927		(1.6	%)		231		(3.3	%)		222		(5.1	%)		453		(4.2	%)		218		(4.8	%)		219		(2.7	%)		890		(4.0	%)
Advertising and Directories		182		9.6	%		581		3.8	%		764		5.4	%		234		10.9	%		300		11.1	%		1,297		7.6	%		213		17.0	%		599		3.1	%		812		6.3	%		269		15.0	%		338		12.7	%		1,419		9.4	%
Intercarrier services		278		(6.1	%)		284		(0.7	%)		563		(3.3	%)		266		(2.9	%)		274		(2.1	%)		1,103		(2.9	%)		277		(0.4	%)		303		6.7	%		580		3.0	%		272		2.3	%		294		7.3	%		1,146		3.9	%
Solutions management		129		13.2	%		113		(9.6	%)		243		1.7	%		121		7.1	%		144		6.7	%		508		4.3	%		140		8.5	%		130		15.0	%		270		11.1	%		129		6.6	%		138		(4.2	%)		537		5.7	%
Hong Kong CSL		191		(21.7	%)		186		(22.5	%)		377		(22.1	%)		167		(31.3	%)		182		0.6	%		726		(20.0	%)		188		(1.6	%)		192		3.2	%		380		0.8	%		179		7.2	%		175		(3.8	%)		734		1.1	%
TelstraClear		142		2.9	%		140		3.7	%		282		3.3	%		144		2.1	%		148		10.4	%		574		4.7	%		152		7.0	%		152		8.6	%		304		7.8	%		158		9.7	%		163		10.1	%		625		8.9	%
Offshore Services Revenue		18		(21.7	%)		31		106.7	%		48		26.3	%		37		117.6	%		46		411.1	%		131		104.7	%		46		155.6	%		43		38.7	%		89		85.4	%		44		18.9	%		48		4.3	%		181		38.2	%
Inbound calling products		119		(5.6	%)		119		(4.0	%)		238		(4.8	%)		120		(1.6	%)		118		(3.3	%)		476		(3.6	%)		117		(1.7	%)		114		(4.2	%)		231		(2.9	%)		110		(8.3	%)		108		(8.5	%)		449		(5.7	%)
PayTV		29	NA				35	NA				65	NA				41		583.3	%		48		182.4	%		154		569.6	%		57		96.6	%		64		82.9	%		121		86.2	%		71		73.2	%		71		47.9	%		263		70.8	%
Customer premises equipment		46		(6.1	%)		46		(9.8	%)		92		(8.0	%)		47		(4.1	%)		45		0.0	%		184		(5.2	%)		42		(8.7	%)		45		(2.2	%)		87		(5.4	%)		41		(12.8	%)		44		(2.2	%)		172		(6.5	%)
Payphones		36		(2.7	%)		37		(2.6	%)		72		(4.0	%)		36		(5.3	%)		33		(5.7	%)		141		(4.7	%)		31		(13.9	%)		32		(13.5	%)		63		(12.5	%)		29		(19.4	%)		29		(12.1	%)		121		(14.2	%)
Other sales & service		162		(34.4	%)		119		(48.0	%)		281		(41.0	%)		151		(26.3	%)		186		(11.0	%)		618		(30.6	%)		176		9.3	%		202		71.2	%		378		34.0	%		188		24.5	%		167		(10.2	%)		733		18.6	%
Sales revenue		5,032		0.5	%		5,424		(0.7	%)		10,456		(0.1	%)		5,006		0.8	%		5,231		3.3	%		20,693		1.0	%		5,244		4.2	%		5,709		5.3	%		10,953		4.8	%		5,169		3.3	%		5,341		2.1	%		21,463		3.7	%
Other revenue		52		(3.7	%)		42		(26.3	%)		94		(15.3	%)		55		17.0	%		64		(38.5	%)		213		(18.7	%)		37		(65.1	%)		44		4.8	%		81		(45.6	%)		39		(36.1	%)		87		97.7	%		207		(18.5	%)
Total revenue		5,084		0.5	%		5,466		(1.0	%)		10,550		(0.3	%)		5,061		1.0	%		5,295		2.5	%		20,906		0.7	%		5,281		2.8	%		5,753		5.3	%		11,034		4.0	%		5,208		2.8	%		5,428		2.9	%		21,670		3.5	%
Selected statistical dataiv
Mobile voice telephone minutes		1,473		15.9	%		1,538		16.2	%		3,011		16.1	%		1,554		20.6	%		1,580		15.2	%		6,145		16.9	%		1,678		13.9	%		1,726		12.2	%		3,404		13.1	%		1,641		5.6	%		1,701		7.7	%		6,746		9.8	%
Short Message Service (SMS) (number of messages) (vii)		439		50.5	%		488		41.5	%		928		45.6	%		499		30.1	%		518		27.6	%		1,944		36.3	%		558		27.1	%		583		19.4	%		1,142		23.1	%		567		13.6	%		580		12.0	%		2,289		17.7	%
Mobile services in operation (thousands) iii		6,720		14.2	%		6,985		14.5	%		6,985		14.5	%		7,169		13.1	%		7,604		15.8	%		7,604		15.8	%		7,665		14.1	%		7,983		14.3	%		7,983		14.3	%		8,059		12.4	%		8,227		8.2	%		8,227		8.2	%
Broadband Retail subscribers		267		57.8	%		288		53.4	%		288		53.4	%		338		61.1	%		427		77.8	%		427		77.8	%		537		100.9	%		622		116.2	%		622		116.2	%		718		112.4	%		856		100.5	%		856		100.5	%
Broadband Wholesale subscribers		172		362.5	%		220		288.9	%		220		289.0	%		281		250.5	%		379		213.4	%		379		213.4	%		495		188.6	%		611		177.8	%		611		177.7	%		761		170.8	%		888		134.4	%		888		134.4	%
Total Broadband subscribers (thousands) (vi)		439		112.6	%		508		107.8	%		508		107.8	%		619		113.5	%		806		123.2	%		806		123.2	%		1,032		135.1	%		1,233		142.9	%		1,233		142.9	%		1,479		138.9	%		1,744		116.4	%		1,744		116.4	%
Narrowband subscribers (thousands)		1,180		8.9	%		1,178		6.8	%		1,178		6.8	%		1,197		5.6	%		1,194		3.1	%		1,194		3.1	%		1,209		2.4	%		1,201		1.9	%		1,201		2.0	%		1,202		0.4	%		1,205		0.9	%		1,205		0.9	%
- Retail (v)		8.71		(3.9	%)		8.64		(3.8	%)		8.64		(3.8	%)		8.58		(3.9	%)		8.44		(4.3	%)		8.44		(4.3	%)		8.34		(4.2	%)		8.21		(4.9	%)		8.21		(5.0	%)		8.13		(5.2	%)		8.05		(4.6	%)		8.05		(4.6	%)
- Wholesale		1.64		20.5	%		1.71		22.1	%		1.71		22.1	%		1.76		21.1	%		1.84		18.4	%		1.84		18.4	%		1.91		16.1	%		1.98		15.8	%		1.98		15.8	%		2.04		15.9	%		2.07		12.5	%		2.07		12.5	%
Basic access lines in service		10.35		(0.7	%)		10.35		(0.3	%)		10.35		(0.3	%)		10.34		(0.4	%)		10.28		(0.8	%)		10.28		(0.8	%)		10.25		(0.9	%)		10.19		(1.5	%)		10.19		(1.5	%)		10.17		(1.6	%)		10.12		(1.6	%)		10.12		(1.6	%)
Local calls (number of calls)		2,435		(3.7	%)		2,396		(3.8	%)		4,831		(3.7	%)		2,324		(3.0	%)		2,242		(5.8	%)		9,397		(4.0	%)		2,233		(8.3	%)		2,179		(9.1	%)		4,412		(8.7	%)		2,045		(12.0	%)		2,012		(10.3	%)		8,469		(9.9	%)
National long distance minutes		2,193		(6.5	%)		2,150		(6.9	%)		4,343		(6.7	%)		2,128		(6.6	%)		2,049		(8.0	%)		8,520		(7.0	%)		2,002		(8.7	%)		1,975		(8.1	%)		3,977		(8.4	%)		1,890		(11.2	%)		1,875		(8.5	%)		7,743		(9.1	%)
Fixed to mobile minutes		1,041		7.3	%		1,058		7.5	%		2,099		7.4	%		1,070		8.1	%		1,057		5.8	%		4,226		7.1	%		1,096		5.3	%		1,110		4.9	%		2,206		5.1	%		1,075		0.5	%		1,094		3.5	%		4,375		3.5	%
International direct minutes		165		(13.4	%)		173		(11.9	%)		338		(12.7	%)		161		(10.7	%)		152		(11.8	%)		651		(12.0	%)		149		(9.8	%)		155		(10.2	%)		304		(10.1	%)		141		(12.4	%)		135		(11.2	%)		580		(10.9	%)
ISDN access (basic lines equivalents) (thousands)		1,210		(1.2	%)		1,224		2.9	%		1,224		2.8	%		1,250		4.2	%		1,288		6.2	%		1,288		6.2	%		1,305		7.8	%		1,318		7.7	%		1,318		7.7	%		1,329		6.3	%		1,327		3.0	%		1,327		3.0	%
Pay TV bundling		177		N/M			208		N/M			208		N/M			231		N/M			258		103.1	%		258		103.1	%		289		63.1	%		309		48.6	%		309		48.6	%		325		40.7	%		335		29.9	%		335		29.9	%

Footnotes:
(i)		Fiscal 2004/2005 and its comparative year exclude Trading Post, Kaz Group, PSInet Group, Telstra Business Systems (formerly Damovo) and Universal Publishers and proceeds from property and investment sales. Fiscal 2003/2004 and its comparative year exclude Trading Post and asset sales.
(ii)		All percentages relate to growth on prior corresponding period.
(iii)		Mobile Services in Operation(SIOs) are net of deactivated prepaid customers who were outside the recharge only period and reflects recent changes in deactivation policy in Q4 2003/2004.
(iv)		Statistical data is represented in millions unless otherwise stated.
(v)		Retail basic access lines in service have been restated to exclude between 105,000 and 84,000 incontact services. The current period has an exclusion of 87,000 incontact services.
(vi)		Broadband subscriber numbers for 03/04 and 04/05 have been restated to include up to 5000 business subscribers previously overlooked in error.
(vii)		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.

Page 41

Telstra Corporation Limited (ABN 033 051 775 556)

Product reconciliation to align comparative figures with the reported format Year Ended 30 June 2005

	Reported		Reported
	previously		New Hierarchy
	released
	Jun-04		Jun-04		Movement				Amount			Amount
	$m		$ m		$ m			Included	$ m		Excluded	$m
Mobile services		3,455		3,470		15
Mobile handsets		352		352		—
Total Mobiles		3,807		3,822		15		CDMA Wholesale Domestic Resale		15
Internet and IP solutions		1,010		1,013		3		Wholesale Internet and Data Other		3
PSTN products
Basic access		3,237		3,237		—
Local calls		1,504		1,504		—
PSTN value added services		259		259		—
National long distance calls		1,121		1,121		—
Fixed to mobile		1,597		1,597		—
International direct		266		266		—
Total PSTN products		7,984		7,984		—
Specialised Data		1,018		1,035		17		Wholesale ATM		17
ISDN Products		927		927		—
Advertising and Directories		1,351		1,341		(10	)				Yellow Pages Direct		10
Intercarrier services		1,138		1,103		(35	)				Wholesale ATM		17
											CDMA Wholesale Domestic Resale		15
											Wholesale Internet and Data Other		3
Solutions management		489		508		19		eBusiness Solutions		19
Hong Kong CSL		726		726		—
TelstraClear		574		574		—
Various controlled entities (excluding HK CSL & TClear)		194		—		(194	)				Offshore services revenue		131
											HFC Cable TV		44
											eBusiness Solutions		19
Offshore services revenue		—		131		131		Offshore services revenue		131
Inbound calling products		476		476		—
Pay TV bundling		—		154		154		Pay TV Bundling		154
Customer premises equipment		184		184		—
Payphones		141		141		—
Other sales & service		718		618		(100	)	HFC Cable TV		44	Pay TV Bundling		154
								Yellow Pages Direct		10
Sales revenue		20,737		20,737		—				393			393
Other revenue		543		543		(0	)
Total revenue		21,280		21,280		(0	)			393			393

Page 42


Media Release

1125 ~~August~~May ~~2005~~2006 ~~246~~103/~~2005~~2006

~~Telstra~~Cash ~~posts~~Capital ~~solid~~Expenditure ~~result in increasingly challenging market~~Guidance

~~Telstra~~As ~~today~~part ~~announced~~of aTelstra’s ~~solid~~05/06 ~~result~~interim ~~for~~results ~~the~~announcement ~~financial~~made ~~year~~on ~~ended~~9 ~~30 June~~February ~~2005~~2006, ~~with~~the company ~~reported~~advised ~~net~~that ~~profit~~cash ~~increasing~~capital ~~$329~~expenditure for the 2005/06 ~~million~~year orwas ~~8.0%~~expected to be between $4.~~447 billion,~~8bn ~~driven by organic~~ and ~~acquisitive growth~~$5.1bn.

~~Telstra~~After ~~Chief~~a ~~Financial~~review ~~Officer,~~of Mrend ~~John~~of ~~Stanhope,~~year ~~said~~expected ~~that~~expenditure ~~while~~levels, ~~the~~this ~~full~~guidance ~~year~~has ~~result~~now ~~was~~been ~~solid the~~revised ~~impact~~to an expectation of ~~intensifying~~between ~~competition~~$4.1bn and ~~accelerating~~$4.4bn. ~~declines~~Of inthe ~~PSTN~~$700 million ~~voice~~reduction ~~revenues~~to ~~was~~guidance ~~clear~~approximately in$200m ais ~~slower~~deferred ~~second~~to ~~half,~~the ~~and~~2006/07 ~~that~~fiscal ~~this~~year. ~~trend~~Management’s ~~was~~focus ~~expected~~has been on optimising project performance and contractual outcomes to ~~continue~~deliver ~~into~~shareholder value during the ~~future~~transformation of the company.

~~Underlying~~There ~~sales~~are ~~revenue~~a ~~increased~~number byof ~~3.7%~~factors orthat ~~$770 million,~~have todriven ~~$21.5 billion,~~this ~~due~~revised ~~mainly~~guidance ~~to growth in broadband, mobiles, advertising~~ and ~~directories,~~these ~~pay TV bundling, and offshore services revenue,~~are:- ~~offset by a decline in PSTN calling products as migration to other products occurs. Underlying domestic sales revenue increased by 3.5% or $666 million to $19.9 billion.~~

~~Underlying~~• ~~earnings~~lower ~~before~~costs ~~interest~~for property, plant and ~~tax~~equipment ~~(EBIT) increased~~as byan ~~3.0%~~outcome orof ~~$198 million~~the tocompany’s ~~$6.9 billion,~~tough ~~with~~procurement ~~reported~~contract ~~EBIT~~negotiations ~~growing~~and byimproved ~~6.8%~~capital orlabour ~~$445 million~~productivity across all projects; • stopping additional discretionary projects that were not aligned to ~~$7.0 billion.~~the ~~Underlying~~transformation ~~earnings before~~strategy; ~~interest,~~• ~~tax,~~efficiencies ~~depreciation~~obtained ~~and~~from ~~amortisation~~merging ~~(EBITDA) increased~~some bytransformation ~~2.9%~~projects; or• ~~$295 million~~lower ~~to $10.6 billion.~~ program of work in some areas; • Transformation project deferrals representing;

The Telstra Board of Directors declared a final ordinary dividend of 14 cents per share, franked at a tax rate of 30%. This brings the total ordinary dividend declared for the year to 28 cents per share, a total of $3.5 billion, up 7.7% on last year (excluding special dividends). The dividend will have a record date of Friday, 30 September 2005 with payment to be made on Monday, 31 October 2005.

	o		minor delays (8-10 weeks) in the Business Support Systems transformation due to some industry changes and some outstanding contract negotiations. This is expected to be recovered next fiscal year; and

	o		minor delays (4-5 weeks) in the wireline transformation due to delays in the completion of key network architecture design. This will also be recovered in the next fiscal year.

AsAll ~~part~~other ofaspects ~~the previously announced three-year, $1.5 billion per year capital management program, the Board has also declared a fully franked special dividend~~ of ~~6 cents per share, to be paid in conjunction with~~ the ~~final~~transformation ~~ordinary~~strategy ~~dividend.~~remain ~~It is the current intention of the Board to pay a further 6 cents per share special dividend with the 2005/2006 interim dividend. During the year, Telstra also delivered~~ on ~~this capital management program through a $750 million first half buyback and the payment of a 6 cents per share special dividend in April 2005, together with the interim dividend~~track.

~~“It~~Capital ~~has~~expenditure ~~been~~for aFibre ~~story~~to ofthe ~~two~~Node ~~halves~~was —not apart ~~stronger~~of ~~first~~the ~~half~~initial ~~followed~~guidance byand ~~slower~~is ~~growth~~not inpart ~~the second.~~of ~~Underlying sales revenue for~~ the ~~year~~revised ~~grew~~guidance. ~~broadly~~The inFibre ~~line~~to ~~with industry growth, which was a key goal for~~ the ~~company,~~Node ~~and~~investment weremains ~~delivered~~ on ~~our commitment to reward shareholders by maximising cash returns,” Mr Stanhope said~~hold.

~~“However,~~All ~~the~~other ~~second~~elements ~~half~~of ~~saw~~the ~~accelerating~~guidance ~~declines~~for in2005/06 ~~PSTN~~given ~~voice~~on ~~revenues~~9 ~~and~~February ~~significant~~remain ~~product substitution emerging~~unchanged. ~~Customers are increasingly shifting usage from higher margin PSTN services~~ ~~to lower margin services such as mobiles and broadband. We expect this trend to continue.”~~

Total PSTN products revenue declined by 3.4% or $275 million for the year with a decline of 1.9% in the first half and 5.1% in the second. Basic access lines declined over the year by 1.6% to 10.12 million. An increase in basic access revenue was offset by volume and yield declines across local calls, international direct and national long distance products due to product substitution, higher package discounts and free call offers.


John Stanhope Chief Financial Officer

Telstra Media Contact		Investors Contact
Andrew Maiden 02 9298 5259		David Anderson 03 9634 2410

~~.../-~~Telstra’s national media inquiry line is 1300 769 780 and the Telstra Media Centre is located at:

www.telstra.com.au/abouttelstra/media

For news, views and discussion on telecommunications in Australia see

www.nowwearetalking.com.au

Telstra Corporation Limited
ABN 33 051 775 556

- 2 -


7 June 2006		Office of the Company Secretary

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

~~Underlying~~ELECTRONIC ~~operating expenses (before depreciation, amortisation, interest and tax) grew by 4.0% or~~LODGEMENT ~~$428 million to $11.1 billion, due mainly to an increase in goods and services purchased and increased labour costs to improve customer service.~~

~~“Telstra~~Dear ~~has~~Sir ~~invested~~or ~~in improved customer service. Staff increases were concentrated in front of~~Madam ~~house and in meeting broadband demand,” Mr Stanhope said.~~

~~With~~Telstra ~~underlying~~presentation ~~operating expenses growing slightly faster than underlying revenue, there was a slight margin contraction. Underlying EBIT margin declined 0.2%~~ to ~~32.1%~~the ~~and~~UBS ~~underlying~~Media ~~EBITDA margin~~& ~~decreased~~Telecommunications ~~by 0.4% to 49.4%.~~Conference

~~Other~~In ~~key~~accordance ~~financial~~with ~~outcomes~~the ~~included:~~listing rules, I attach a copy of a presentation by Justin Milne, Group Managing Director BigPond, at the UBS Media & Telecommunications Conference, for release to the market.

•Yours Domestic core operating capital expenditure increased 15.5% to around $3.3 billion, including expenditure on building the 3G application core, in line with market guidance; • Although weakening in the second half, operating cash flow less cash flow used in investing activities (free cash flow) grew 4.6%; and • Reported earnings per share (EPS) grew by 9.6% to 35.5 cents and underlying EPS grew by 6.7% to 34.8 cents.sincerely

~~Operational~~Douglas ~~highlights~~Gration Company ~~for the year included:~~Secretary

• 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 mobiles achieved growth of 8.3% or $319 million to $4.1 billion; • Telstra ~~added~~Corporation ~~168,000~~Limited ACN ~~mobile~~051 ~~SIOs~~775 in556 ABN ~~the~~33 ~~fourth~~051 ~~quarter~~775 for a total of 8.227 million, an increase of 623,000 or 8.2% for the year; • The number of Short Message Service (SMS) sent grew 18% to 2.3 billion messages for the year; • Total internet and IP services demonstrated exceptional growth, with revenue increasing by $364 million or 35.9% to $1.4 billion; • Total broadband revenue growth of $307 million was driven by subscriber growth of 116.4% from 806,000 to 1.744 million, with significant growth in both ADSL and cable subscribers; • Reported advertising and directories revenue grew by 18.2% to $1.6 billion. After excluding Trading Post and Universal Publishers revenue, underlying advertising and directories revenue increased by 9.4%, driven by a range of White Pages and Yellow Pages advertising enhancements; • Telstra introduced Telstra Pre-Paid Call Credits which, together with the recently introduced Home and Mobile capped plans, demonstrate the company’s determination to find smarter ways to offer value for money to customers; • 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 PSTN connections was 93% on time and for fault repairs was 91% on time, while 99.07% of PSTN customers did not experience a fault; • Increased staff numbers delivered significant improvement in grade of service at Front of House, with Telstra now consistently meeting the target of 80% of calls to the main customer service numbers being answered by a consultant within 20 seconds of leaving the interactive voice portal; • The Trading Post is on track, achieving the $64 million EBITDA target set for its first full fiscal year; and • As part of its three year cost reduction program, Telstra has identified and extracted a further $300 million in cost savings in the 2005 financial year.556

.../-

-BigPond ~~3 -~~ Content

~~Internationally,~~UBS ~~Hong~~Media ~~Kong~~& ~~CSL~~Telecommunications ~~increased sales revenues by 1.1% and TelstraClear achieved revenue growth of 8.9% in $A terms, while reported offshore services revenue increased by 92% or $121 million for the year.~~ Conference

~~Commenting~~7th ~~on the company’s outlook~~June, ~~Telstra~~2006 ~~Chief~~1 ~~Executive~~Title: ~~Officer,~~070606 Mr— ~~Solomon~~UBS ~~Trujillo, said that a full-scale strategic review was being conducted at the Board’s request and that all stakeholders would be briefed on the outcome of the review as it is completed.~~ Conference

New sources of revenue and further cost reductions will be necessary to drive earnings growth in the future.

Mr Trujillo said that Telstra’s outlook may change once the review is finalised and plans are implemented but in the interim the company expects:

• Current regulation, intensifying competition, accelerating decline in PSTN voice revenues and a changing revenue mix will continue to put pressure on Telstra’s top line and margins;

• Broadband and Sensis performance to remain strong;

• An increase in the adoption of capped plans to impact the mobiles segment performance in 2005/2006;

• Cashflow in 2005/2006 to be impacted by payments to Hutchison, higher capital expenditure to meet broadband demand and investment in a number of business improvement initiatives;

• Increasing depreciation and amortisation expense, reflecting the additional CAPEX spend and the amortisation of the 3G network and spectrum; and

• That earnings will likely decline in 2005/2006 at the EBITDA and EBIT lines.

Mr Stanhope confirmed that the trading results for the first month of fiscal 2006 were consistent with this guidance.

Mr Stanhope advised that Telstra’s financial statements for the first half of the 2006 financial year onward would be prepared under the Australian equivalents of International Financial Reporting Standards (A-IFRS), as adopted by the Australian Accounting Standards Board. Under A-IFRS, Telstra expects its net profit after tax to be more volatile compared with existing Australian reporting requirements. However, the adoption of A-IFRS is not expected to significantly affect Telstra’s net cash flow, ability to borrow funds or capacity to pay dividends to shareholders.

Telstra Media Contact Kerrina Lawrence Tel: 03 9634 5611 Mbl: 0419 352 313

Telstra’s national media inquiry line is 13 1639 and the Telstra Media Centre is located at: www.telstra.com.au/abouttelstra/media

Telstra Corporation Limited and controlled entities

Financial Report
as at 30 June 2005
			Page
			Number
Financial Statements
Statement of Financial Performance				2
Statement of Financial Position				3
Statement of Cash Flows				4
Statement of Changes in Shareholders’ Equity				9
Notes to the Financial Statements
Note 1	—	Summary of accounting policies		12
Note 2	—	Revenue		38
Note 3	—	Profit from ordinary activities		39
Note 4	—	Income tax expense		44
Note 5	—	Segment information		46
Note 6	—	Earnings per share		54
Note 7	—	Dividends		55
Note 8	—	Cash assets		57
Note 9	—	Receivables		58
Note 10	—	Inventories		60
Note 11	—	Investments		61
Note 12	—	Property, plant and equipment		63
Note 13	—	Intangible assets		68
Note 14	—	Other assets		70
Note 15	—	Payables		71
Note 16	—	Interest-bearing liabilities		72
Note 17	—	Provisions		76
Note 18	—	Contributed equity		78
Note 19	—	Employee share plans		79
Note 20	—	Expenditure commitments		95
Note 21	—	Contingent liabilities and contingent assets		98
Note 22	—	Superannuation commitments		100
Note 23	—	Investments in controlled entities		102
Note 24	—	Investments in joint venture entities and associated entities		112
Note 25	—	Directors’ remuneration — salaries and other benefits		120
Note 26	—	Executives’ remuneration — salaries and other benefits		123
Note 27	—	Related party, directors’ and specified executives’ disclosures		126
Note 28	—	Events after balance date		132
Note 29	—	Additional financial instruments disclosures		133
Note 30	—	United States generally accepted accounting principles disclosures		142
Directors’ Declaration				167
This financial report combines the disclosure requirements for both Australian and United States generally accepted accounting principles.
Independent Audit Reports				168

~~Telstra~~The ~~Corporation~~future ~~Limited~~will ~~and~~be ~~controlled~~about ~~entities~~ using multiple devices on one IP network Communication Work Entertainment Information 2Title: 070606 – UBS Conference

			Telstra Group												Telstra Entity
			Year ended 30 June												Year ended 30 June
			2005			2005			2004			2003			2005		2004
	Note		$m			US$m			$m			$m			$m		$m
Ordinary activities
Revenue
Sales revenue		2		22,161			16,882			20,737			20,495			19,587		18,996
Other revenue (excluding interest revenue)		2,3		496			378			543			1,121			357		391
				22,657			17,260			21,280			21,616			19,944		19,387
Expenses
Labour		3		3,693			2,813			3,218			3,204			2,916		2,807
Goods and services purchased		3		4,147			3,159			3,554			3,713			2,894		2,684
Other expenses		3		4,055			3,089			4,255			4,504			3,666		3,844
				11,895			9,061			11,027			11,421			9,476		9,335
Share of net (profit)/loss from joint venture entities and associated entities		24		(9	)		(7	)		78			1,025			—		—
				11,886			9,054			11,105			12,446			9,476		9,335
Earnings before interest, income tax expense, depreciation and amortisation (EBITDA)				10,771			8,206			10,175			9,170			10,468		10,052
Depreciation and amortisation		3		3,766			2,869			3,615			3,447			3,298		3,228
Earnings before interest and income tax expense (EBIT)				7,005			5,337			6,560			5,723			7,170		6,824
Interest revenue		2		103			78			55			84			103		95
Borrowing costs		3		839			639			767			879			851		843
Net borrowing costs				736			561			712			795			748		748
Profit before income tax expense				6,269			4,776			5,848			4,928			6,422		6,076
Income tax expense		4		1,822			1,388			1,731			1,534			1,777		1,697
Net profit				4,447			3,388			4,117			3,394			4,645		4,379
Outside equity interests in net loss				—			—			1			35			—		—
Net profit available to Telstra Entity shareholders				4,447			3,388			4,118			3,429			4,645		4,379
Other valuation adjustments to equity
Net exchange differences on translation of financial statements of non-Australian controlled entities				(43	)		(33	)		21			(161	)		—		—
Reserves recognised on equity accounting our interest in joint venture entities and associated entities				3			2			(5	)		(18	)		—		—
Increase to opening retained earnings on adoption of new accounting standard				—			—			—			1,415			—		—
Valuation adjustments attributable to Telstra Entity shareholders and recognised directly in equity				(40	)		(31	)		16			1,236			—		—
Total changes in equity other than those resulting from transactions with Telstra Entity shareholders as owners				4,407			3,357			4,134			4,665			4,645		4,379
				¢		US¢				¢			¢
Basic and diluted earnings per share (cents per share)		6		35.5			27.0			32.4			26.6
Total dividends paid/declared (cents per share)		7,28		40.0			30.0			26.0			27.0

The notes following the financial statements form part of the financial report.

Telstra ~~Corporation~~is ~~Limited~~focusing ~~and~~on ~~controlled~~developing ~~entities~~ a relationship with Australians in their digital homes...

			Telstra Group									Telstra Entity
			As at 30 June									As at 30 June
			2005			2005			2004			2005		2004
	Note		$m			US$m			$m			$m		$m
Current assets
Cash assets		8		1,540			1,174			687			1,360		543
Receivables		9		3,609			2,749			3,608			3,566		3,258
Inventories		10		232			177			229			194		206
Other assets		14		796			606			803			679		687
Total current assets				6,177			4,706			5,327			5,799		4,694
Non current assets
Receivables		9		240			183			740			290		1,047
Inventories		10		15			11			10			15		10
Investments — accounted for using the equity method		11		49			37			40			44		32
Investments — other		11		—			—			80			6,029		5,435
Property, plant and equipment		12		23,351			17,789			22,863			21,573		21,600
Intangibles — goodwill		13		2,287			1,742			2,104			12		16
Intangibles — other		13		1,581			1,204			1,501			182		220
Other assets		14		2,610			1,988			2,328			2,332		2,160
Total non current assets				30,133			22,954			29,666			30,477		30,520
Total assets				36,310			27,660			34,993			36,276		35,214
Current liabilities
Payables		15		2,809			2,140			2,338			1,957		1,891
Interest-bearing liabilities		16		1,518			1,156			3,246			3,903		5,527
Income tax payable				534			407			539			519		512
Provisions		17		389			296			358			324		331
Revenue received in advance				1,132			862			1,095			912		885
Total current liabilities				6,382			4,861			7,576			7,615		9,146
Non current liabilities
Payables		15		122			93			49			13		46
Interest-bearing liabilities		16		11,816			9,001			9,014			11,782		9,014
Provision for deferred income tax				1,885			1,436			1,807			1,826		1,748
Provisions		17		836			637			778			779		740
Revenue received in advance				388			296			408			381		398
Total non current liabilities				15,047			11,463			12,056			14,781		11,946
Total liabilities				21,429			16,324			19,632			22,396		21,092
Net assets				14,881			11,336			15,361			13,880		14,122
Shareholders’ equity
Telstra Entity
Contributed equity		18		5,793			4,413			6,073			5,793		6,073
Reserves				(157	)		(120	)		(105	)		277		277
Retained profits				9,243			7,041			9,391			7,810		7,772
Shareholders’ equity available to Telstra Entity shareholders				14,879			11,334			15,359			13,880		14,122
Outside equity interests
Contributed equity				2			2			2			—		—
Total outside equity interests				2			2			2			—		—
Total shareholders’ equity				14,881			11,336			15,361			13,880		14,122
Expenditure commitments, contingent liabilities and assets		20,21

Kitchen

~~The~~Broadband ~~notes following the financial statements form part of the financial report.~~ Phone

3 Family Zone Premium Mail Hosting

Home Office

Horseracing

BigPond Movies BigPond Music Online Storage Anti-Spam Firewall & Security

BigBlog

AFL V8 Supercars VOBB NRL BigPond Games

3 Title: 070606 — UBS Conference

~~Telstra~~...and ~~Corporation~~is ~~Limited~~positioning ~~and~~BigPond ~~controlled~~as ~~entities~~ a brand to win in a converged world

			Telstra Group												Telstra Entity
			Year ended 30 June												Year ended 30 June
			2005			2005			2004			2003			2005			2004
	Note		$m			US$m			$m			$m			$m			$m
Cash flows from operating activities
Receipts from trade and other receivables (c)				24,526			18,684			23,205			22,721			21,343			20,926
Payments of accounts payable and to employees (c)				(12,754	)		(9,716	)		(12,067	)		(12,130	)		(10,029	)		(9,862	)
Interest received				80			61			51			70			81			92
Borrowing costs paid				(879	)		(670	)		(846	)		(999	)		(892	)		(922	)
Dividends received				2			2			2			7			1			1
Income taxes paid				(1,718	)		(1,309	)		(1,856	)		(1,536	)		(1,712	)		(1,804	)
GST remitted to the Australian Taxation Office (ATO)				(1,094	)		(833	)		(1,056	)		(1,076	)		(1,050	)		(1,044	)
Net cash provided by operating activities (a)				8,163			6,219			7,433			7,057			7,742			7,387
Cash flows from investing activities
Payments for:
- property, plant and equipment				(2,995	)		(2,282	)		(2,572	)		(2,704	)		(2,715	)		(2,505	)
- internal use software assets				(523	)		(398	)		(435	)		(555	)		(446	)		(385	)
- intangibles				(6	)		(5	)		(2	)		(2	)		—			—
- deferred expenditure				(15	)		(11	)		(6	)		—			(14	)		(6	)
Capital expenditure (before investments)				(3,539	)		(2,696	)		(3,015	)		(3,261	)		(3,175	)		(2,896	)
- shares in controlled entities				(574	)		(437	)		(667	)		(25	)		(28	)		(637	)
- investment in joint venture entities				(10	)		(8	)		(1	)		(45	)		(5	)		—
- investment in associated entities (including share buy-back)				(4	)		(3	)		1			—			—			1
- shares in listed securities and other investments				(2	)		(2	)		(1	)		(1	)		(1	)		(1	)
Investment expenditure				(590	)		(450	)		(668	)		(71	)		(34	)		(637	)
Total capital expenditure				(4,129	)		(3,146	)		(3,683	)		(3,332	)		(3,209	)		(3,533	)
Proceeds from:
- sale of property, plant and equipment				68			52			168			797			79			197
- sale of shares in controlled entities				—			—			—			12			—			—
- sale of joint venture entities and associated entities				30			23			221			20			30			—
- sale of listed securities and other investments				146			111			24			7			134			41
- sale of business				—			—			—			4			—			—
- redemption of PCCW converting note				76			58			—			—			76			—
Net cash used in investing activities				(3,809	)		(2,902	)		(3,270	)		(2,492	)		(2,890	)		(3,295	)
Operating cash flows less investing cash flows				4,354			3,317			4,163			4,565			4,852			4,092
Cash flows from financing activities
Proceeds from borrowings				6,433			4,901			4,119			5,914			6,611			4,329
Proceeds from Telstra bonds				983			749			—			—			983			—
Repayment of borrowings				(5,735	)		(4,369	)		(4,274	)		(6,315	)		(6,478	)		(4,411	)
Repayment of Telstra bonds				(272	)		(207	)		(211	)		(582	)		(272	)		(211	)
Repayment of finance leases principal amount				(16	)		(12	)		(13	)		(22	)		(11	)		(11	)
Employee share loans				19			14			24			33			19			24
Loan to joint venture entities and associated entities				(37	)		(28	)		(226	)		—			—			(226	)
Dividends paid		7		(4,131	)		(3,147	)		(3,186	)		(3,345	)		(4,131	)		(3,186	)
Share buy-back (d)				(756	)		(576	)		(1,009	)		—			(756	)		(1,009	)
Net cash used in financing activities				(3,512	)		(2,675	)		(4,776	)		(4,317	)		(4,035	)		(4,701	)
Net increase/(decrease) in cash				842			642			(613	)		248			817			(609	)
Foreign currency conversion				(3	)		(2	)		—			(18	)		—			—
Cash at the beginning of the year				687			523			1,300			1,070			543			1,152
Cash at the end of the year (b)				1,526			1,163			687			1,300			1,360			543

3G Mobile

~~The~~Fixed ~~notes following the financial statements form part of the financial report.~~ Broadband

4 Wireless Broadband

4 Title: 070606 — UBS Conference

~~Telstra~~BigPond ~~Corporation~~has ~~Limited~~developed ~~and~~a ~~controlled~~market ~~entities~~ leading suite of content services

			Telstra Group												Telstra Entity
			Year ended 30 June												Year ended 30 June
			2005			2005			2004			2003			2005			2004
	Note		$m			US$m			$m			$m			$m			$m
Cash flow notes
(a) Reconciliation of net profit to net cash provided by operating activities
Net profit				4,447			3,388			4,117			3,394			4,645			4,379
Add/(subtract) the following transactions
Depreciation and amortisation		3		3,766			2,869			3,615			3,447			3,298			3,228
Accrued interest on notes issued by PCCW				(4	)		(3	)		(4	)		(15	)		(4	)		(4	)
Dividends received from related entities		24		2			2			1			6			1			(142	)
Profit on sale of property, plant and equipment		3		(8	)		(6	)		(40	)		(173	)		(10	)		(40	)
Profit on sale of controlled entities		3		—			—			—			(5	)		—			—
Profit on sale of joint venture and associated entities		3		(16	)		(12	)		(170	)		(12	)		(27	)		—
Profit on sale of listed securities and other entities		3		(67	)		(51	)		(8	)		2			(63	)		(8	)
Profit on sale of business		3		—			—			—			(10	)		—			—
Loss on redemption of PCCW converting note		3		4			3			—			—			4			—
Borrowing costs included in the cost of constructed assets		3		(90	)		(70	)		(74	)		(105	)		(90	)		(74	)
Share of joint venture entities’ net losses		24		—			—			85			1,015			—			—
Share of associated entities’ net (profits)/losses		24		(9	)		(7	)		(7	)		10			—			—
Provision for reduction in value of investments		3		6			5			—			26			(310	)		(709	)
Provision for reduction in value of controlled entity receivables		3		—			—			—			—			460			709
Provision for reduction in amount owed by joint venture entity		3		5			4			226			—			—			226
Net foreign currency conversion differences				6			5			3			(39	)		—			—
Decrease in non cash receivable from related entity				—			—			—			—			(361	)		—
Other				32			24			6			47			61			13
Movements in operating assets and liabilities (net of acquistions of controlled entity balances)
(Increase)/decrease in trade debtors and other debtors				24			18			143			4			47			75
(Increase)/decrease in inventories				9			7			35			(52	)		7			60
(Increase)/decrease in deferred expenditure and prepayments				(7	)		(5	)		6			48			(15	)		3
(Increase)/decrease in deferred mobile phone handset subsidies				(75	)		(57	)		(104	)		(42	)		(75	)		(104	)
Increase/(decrease) in accounts payable and other creditors				15			11			(335	)		(271	)		47			(166	)
Increase/(decrease) in revenue received in advance				(13	)		(10	)		98			(66	)		10			69
Increase/(decrease) in net taxes payable				105			80			(125	)		9			85			(107	)
Increase/(decrease) in provisions				31			24			(35	)		(161	)		32			(21	)
Net cash provided by operating activities				8,163			6,219			7,433			7,057			7,742			7,387
(b) Reconciliation of cash balances
Cash at the end of the year as shown in the statement of cash flows agrees to the net amount of the following items in the notes to the financial statements:
Cash assets		8		1,540			1,174			687			1,300			1,360			543
Bank overdraft		16		(14	)		(10	)		—			—			—			—
				1,526			1,164			687			1,300			1,360			543

Entertainment Sport

5 • Exclusive content

· NRL

· AFL

· V8 supercars

Mobile/Broadband Integration

• Shared sport Content

· Com Games coverage • mobile DVD Rental • mobile music download to PC

Movies Music Games

Content enables BigPond to rely less on price as a differentiator and to focus on the value proposition for customers

5 Title: 070606 — UBS Conference

~~Telstra~~The ~~Corporation~~Commonwealth ~~Limited~~Games ~~and~~was ~~controlled~~used ~~entities~~ to promote market leading content and functionality

~~Cash~~3G ~~flow~~Phones ~~notes~~to ~~(continued)~~ support launch of BigPond mobile services

~~(c) Goods~~• Blogs and ~~Services Tax (GST)~~ Email

~~Our~~· receipts from trade and other receivables includes estimated GST of $2,121 million (2004: $2,030 million; 2003: $2,072 million) collected by us as agent for the ATO. Our payments of accounts payable and to employees include estimated GST payments made by us for goods and services obtained in undertaking both operating and investing activities. GST paid associated with operating activities amounted to $784 million (2004: $750 million; 2003: $639 million) and GST paid relating to investing activities amounted to $243 million (2004: $224 million; 2003: $356 million). Photos

~~(d) Share~~· ~~buy-back~~ Video Telephony & Messaging

On· 15BigPond ~~November 2004,~~Mobile weClient completed an off-market share buy-back of 185,284,669 ordinary shares as part of our capital management program. The cost of the share buy back comprised purchase consideration of $750 million and associated transaction costs of $6 million. During fiscal 2004, we also completed an off-market share buy-back of 238,241,174 ordinary shares. The cost of the 2004 buy-back comprised purchase consideration of $1,001 million and associated transaction costs of $8 million. Refer to note 18 for further information. (TAM)

~~(e) Significant~~· ~~financing~~New ~~and investing activities that involve non cash components~~ headsets

~~Capitalised~~· ~~Interest~~ Stimulator for hero handset

~~Our~~Samsung ~~property,~~Motorola ~~plant~~Z510 ~~and~~V3x ~~equipment~~6 ~~includes borrowing costs of $70 million (2004~~Title: ~~$57 million;~~070606 ~~2003:~~— ~~$77 million)~~UBS which have been included in the cost of constructed assets. Our software assets include borrowing costs of $20 million (2004: $17 million; 2003: $28 million) which have been included in the cost of constructed assets. These amounts are included in borrowing costs paid in our statement of cash flows. Conference

Sale and leaseback transactions

There were no significant sale and leaseback transactions entered into during fiscal 2005 or fiscal 2004.

During fiscal 2003, we entered into a sale and leaseback on a portfolio of seven office properties for $570 million. We entered into operating leases totalling $518 million in relation to these properties on normal commercial terms of between five and twelve years. The profit on the sale of this property, plant and equipment was $131 million before income tax expense. The cash inflow from this sale is recognised in our proceeds from the sale of property, plant and equipment (refer to note 3 for further information).

Acquisition of 3G assets

During fiscal 2005, we acquired a 50% interest in Hutchison 3G Australia Pty Ltd’s existing third generation (3G) radio access network amounting to $428 million at acquisition date. This acquisition is not fully reflected in our statement of cash flows as the purchase price is being paid in instalments through to 1 July 2006. As at 30 June 2005, we have paid $22 million to our joint venture partner for the acquisition of these assets. The balance is reflected in our deferred liabilities. Refer to note 15 for further information.

(f) Financing facilities

Details of credit standby arrangements and loan facilities are shown in note 16.

(g) Acquisitions

Fiscal 2005 — Telstra Group

During fiscal 2005 we acquired the following controlled entities:

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

On 25 August 2004, we acquired 100% of the issued share capital of PSINet UK Limited and its controlled entities for an initial cash consideration of $111 million, including acquisition costs, and deferred consideration amounting to $13 million.

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

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

In addition to the above, we made a number of other minor acquisitions for a total consideration of $16 million during the year. Included in these acquisitions was an additional 10% interest in 1300 Australia Pty Ltd, which gave us a controlling interest in this entity.

~~Telstra~~Going ~~Corporation~~forward ~~Limited~~we will increase content penetration and ~~controlled~~the ~~entities~~ number of transactions / subscriptions per visitor

~~Cash~~1. ~~flow~~Increased ~~notes (continued)~~ Penetration

~~(g) Acquisitions (continued)~~ Advertising

~~Details~~· ofLeverage ~~the~~Telstra ~~acquisitions~~generic ~~are~~brand asads ~~follows:~~ for Content

	Year ended
	30 June
	2005
Acquisition of controlled entities	$m
Consideration for acquisitions
Cash		565
Deferred consideration		13
Costs of acquisitions		14
		592
Fair value of assets and liabilities acquired by major class
Cash assets		13
Receivables		117
Inventories		17
Property, plant and equipment		77
Intangibles		235
Software		15
Other assets		15
Deferred tax assets		21
Payables		(99	)
Provisions		(58	)
Finance lease liability		(39	)
Interest-bearing liabilities		(8	)
Other liabilities		(39	)
Fair value of net assets on gaining control		267
Adjustment upon increase in ownership interest from associated entity to controlled entity		(2	)
Goodwill on acquisition		327
		592
Outflow of cash on acquisitions
Consideration for acquisitions		(565	)
Cash balances acquired		13
Costs of acquisitions		(14	)
Payments of deferred consideration for prior years’ acquisitions		(8	)
		(574	)

· Content specific advertising to increase awareness of on-line Content

~~Fiscal 2005 — Telstra Entity~~ Distribution

~~During~~· ~~fiscal~~Through ~~2005 there were no businesses acquired by the~~ Telstra ~~Entity.~~call However, funding has been provided by the Telstra Entity to facilitate acquisitions within the Telstra Group and this has been reflected in investments where additional share capital has been issued by subsidiaries. centres

~~Fiscal~~· ~~2004~~Through —retail ~~Telstra~~outlets ~~Group~~ (pre-paid and non prepaid)

~~During~~2. ~~fiscal~~New ~~2004~~Product ~~we acquired the following controlled entities:~~ Services

On· 13Game February 2004, we acquired 100% of the share capital of Cable Telecom (GB) Limited (Cable Telecom) for an initial cash consideration of $31 million (GBP 13 million) and deferred consideration of $7 million (GBP 3 million). Downloads

On· 5Music ~~March 2004,~~dual-delivery ~~we acquired 100% of the share capital of Trading Post~~ (~~Australia)~~Broadband ~~Holdings Pty Ltd~~ and ~~its controlled entities (Trading Post Group~~mobile) ~~for an initial cash consideration of $636 million and deferred consideration of $2 million.~~

On· 31Viiv/Media ~~March 2004,~~Centre ~~we acquired 75% of the share capital of Invizage Pty Ltd (Invizage) for an initial cash consideration of $4 million and deferred consideration of $3 million.~~ implementation

~~Details~~· ofMobile ~~the acquisitions are as follows:~~ TV

	Year ended
	30 June
	2004
Acquisition of controlled entities	$m
Consideration for acquisitions
Cash		673
Deferred consideration		11
Costs of acquisitions		1
		685
Fair value of assets and liabilities acquired by major class
Cash assets		7
Receivables		9
Property, plant and equipment		8
Intangibles		477
Other assets		5
Deferred tax assets		2
Payables		(28	)
Provisions		(3	)
Finance lease liability		(1	)
Fair value of net assets on gaining control		476
Goodwill on acquisition		209
		685
Outflow of cash on acquisitions
Consideration for acquisitions		(673	)
Cash balances acquired		7
Costs of acquisitions		(1	)
		(667	)

3. Increased ARPU

7 New revenue models

· Subscription

· Bundles

Simplified transactions/billing

•Unified identification and billing

•Integration between mobile and Broadband

7 Title: 070606 — UBS Conference

Telstra Corporation Limited and controlled entities


14 June 2006		Office of the Company Secretary

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

~~Cash~~ELECTRONIC ~~flow notes (continued)~~LODGEMENT

~~Fiscal~~Dear ~~2004~~Sir —or ~~Telstra Entity~~Madam

~~During fiscal 2004, the~~ Telstra ~~Entity~~presentation ~~acquired~~to the ~~NDC construction~~Citigroup ~~business~~Next ~~from~~Generation ~~our~~Wireless ~~wholly~~Communications ~~owned subsidiary Network Design and Construction Limited (NDC). This involved the transfer of NDC’s assets, including customer bases and the recognition of $16 million~~ in ~~goodwill,~~ ~~which is eliminated on consolidation.~~Australia Conference

~~The~~In ~~Telstra~~accordance ~~Entity~~with ~~also~~the ~~acquired~~listing ~~the~~rules, ~~assets~~I ofattach ~~its wholly~~a ~~owned~~copy ~~subsidiary~~of ~~Telstra~~a ~~New~~presentation ~~Wave~~by ~~Pty~~Mike ~~Ltd (~~Robey, Telstra Consumer ~~New~~Marketing ~~Wave)~~and Channels, ~~which~~at ~~involved~~ the ~~acquisition of~~Citigroup ~~$14 million~~Next Generation Wireless Communications in Australia ~~identifiable~~Conference, ~~intangible~~for ~~assets~~release to the market.

~~Details~~Yours ~~of the acquisition are as follows:~~sincerely

	Year ended
	30 June
	2004
Acquisition of business	$m
Consideration for acquisition
Intercompany loan		39
Fair value of assets and liabilities acquired by major class
Construction WIP		34
Inventory		3
Property, plant and equipment		49
Identifiable intangible assets		18
Software		6
Other assets		1
Payables		(3	)
Provisions		(65	)
Accrued expenses		(12	)
Finance lease liability		(8	)
Fair value of net assets on gaining control		23
Goodwill on acquisition		16
		39

Douglas Gration
Company Secretary

~~There~~Telstra ~~was~~Corporation noLimited ACN ~~cash~~051 ~~consideration~~775 ~~paid~~556 ABN as33 ~~part~~051 of775 ~~these acquisitions.~~556

Fiscal 2003 — Telstra Group

On 9 April 2003, we acquired an additional 41.6% interest in TelstraClear Limited (TelstraClear) giving us 100% ownership of this company and its controlled entities.

Cash consideration for this additional acquisition was $25 million (NZ$26.9 million). As we controlled TelstraClear prior to this transaction, we were already consolidating their results, financial position and cash flows in to the Telstra Group.

Fiscal 2003 — Telstra Entity

There were no significant acquisitions of businesses by the Telstra Entity other than those noted above during fiscal 2003.

(h) Disposals of entities

There were no significant disposals of controlled entities during fiscal 2005, fiscal 2004 or fiscal 2003.

~~Telstra~~Next ~~Corporation~~Generation ~~Limited~~Wireless ~~and~~Communications ~~controlled~~in ~~entities~~ Australia

~~Statements~~Mike ofRobey ~~Changes~~Telstra inConsumer ~~Shareholders’~~Marketing ~~Equity~~and Channels Citigroup, June 2006 Page 1 Version 1

for the year ended 30 June 2005

Telstra Group
				Reserves
						Foreign						Consolid-
	Contributed			Asset		currency						ation						Outside
	equity			revaluation		translation			General			fair value			Retained			equity
	(i)			(ii)		(iii)			(iv)			(v)			profits			interests			Total
	$m			$m		$m			$m			$m			$m			$m			$m
Balance at 30 June 2002		6,433			32		(55	)		(17	)		54			7,661			(2	)		14,106
- increase to opening retained profits on adoption of new accounting standard (vi)		—			—		—			—			—			1,415			—			1,415
- change in outside equity interests’ capital, reserves and accumulated losses (apart from interests in net loss)		—			—		—			—			—			(8	)		39			31
- net profit/(loss)		—			—		—			—			—			3,429			(35	)		3,394
- reserves recognised on equity accounting our interest in joint venture entities and associated entities		—			—		(21	)		3			—			—			—			(18	)
- adjustment on translation of financial statements of non-Australian controlled entities		—			—		(161	)		—			—			—			—			(161	)
- fair value adjustment on acquisition of controlling interest in joint venture entity		—			—		—			—			(4	)		4			—			—
- transfer of foreign currency translation reserve on sale of controlled entities and associates		—			—		(3	)		22			—			(19	)		—			—
- dividends (note 7)		—			—		—			—			—			(3,345	)		—			(3,345	)
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 (vii)		(360	)		—		—			—			—			(649	)		—			(1,009	)
- dividends (note 7)		—			—		—			—			—			(3,186	)		—			(3,186	)
Balance at 30 June 2004		6,073			32		(186	)		5			44			9,391			2			15,361

(continued over page)

The notes following the financial statements form part of the financial report.

~~Telstra~~Mobiles ~~Corporation~~are ~~Limited~~now ~~and~~very ~~controlled~~much ~~entities~~ more than voice!

~~Statement~~From ofend-April ~~Changes~~2005 into ~~Shareholders’~~end-April ~~Equity (continued)~~ 2006

Telstra Group
				Reserves
						Foreign						Consolid-
	Contributed			Asset		currency						ation						Outside
	equity			revaluation		translation			General			fair value			Retained			equity
	(i)			(ii)		(iii)			(iv)			(v)			profits			interests		Total
	$m			$m		$m			$m			$m			$m			$m		$m
Balance at 30 June 2004		6,073			32		(186	)		5			44			9,391			2		15,361
- net profit		—			—		—			—			—			4,447			—		4,447
- reserves recognised on equity accounting our interest in joint venture entities and associated entities		—			—		(2	)		5			—			—			—		3
- adjustment on translation of financial statements of non-Australian controlled entities		—			—		(43	)		—			—			—			—		(43	)
- fair value adjustment on acquisition of controlling interest in joint venture entity		—			—		—			—			(6	)		6			—		—
- transfer of general reserve on sale of associates		—			—		—			(6	)		—			6			—		—
- share buy-back (vii)		(280	)		—		—			—			—			(476	)		—		(756	)
- dividends (note 7)		—			—		—			—			—			(4,131	)		—		(4,131	)
Balance at 30 June 2005		5,793			32		(231	)		4			38			9,243			2		14,881
Balance at 30 June 2005 US$m		4,413			24		(176	)		3			29			7,041			2		11,336

a26% increase in SMS messages a34% increase in MMS messages
a23% increase in active Mobile Browsing users a42% increase in Mobile Games downloads aMobile data traffic more than doubled

~~(i) Refer~~Our tohandsets ~~note~~are 18changing ~~for details of our contributed equity.~~ too!

~~(ii) The~~Telstra ~~asset~~handset ~~revaluation~~base ~~reserve~~technology ~~was~~penetration previously used to record changes in the value of non current assets. Under AASB 1041: “Revaluation of Non-Current Assets”, we have previously deemed the carrying value of our property, plant and equipment assets (~~refer to note 12~~%) to be cost. As a result, the asset revaluation reserve may no longer be used to record the writedowns of these assets to recoverable amount. Any writedowns of these assets to recoverable amount must be made through the statement of financial performance.

AsMarch a03 ~~consequence~~December of applying the cost method of accounting, we have discontinued our policy of revaluing property, plant and equipment upwards. The asset revaluation reserve can no longer be used for distribution to shareholders or for offsetting revaluation decrements due to legal and accounting restrictions. 05

~~(iii) The~~WAP ~~foreign~~22% ~~currency~~57% ~~translation~~MMS ~~reserve~~1% is45% ~~used to~~Java ~~record~~1% exchange differences arising from the conversion of the financial statements of our self sustaining non-Australian operations into Australian dollars. Conversion of operations where entities operate on their own are taken to the foreign currency translation reserve, while conversion of those entities that operate with us are taken to the statement of financial performance. 41%

~~This~~Page ~~reserve~~2 isVersion also used to record our percentage share of exchange differences arising from equity accounting our non-Australian investments in joint venture entities and associated entities. The foreign currency translation reserve applicable to joint venture entities and associated entities is shown in note 24. 1

(iv) The general reserve represents our share of the capital reserve of joint venture entities and associated entities as a result of equity accounting. The reserves applicable to these investments is shown in note 24.

(v) The consolidation fair value reserve represents our share of the fair value adjustments to TelstraClear Limited net assets on acquisition of a controlling interest. The reserve balance is amortised over the useful life of the underlying revalued assets (average of 18 years).

(vi) Due to the first time application of accounting standard AASB 1044: “Provisions, Contingent Liabilities and Contingent Assets” during fiscal 2003, we adjusted the opening balance of retained profits at 1 July 2002 by the amount of the dividend provided for as at 30 June 2002.

(vii) On 15 November 2004, we completed an off-market share buy-back of 185,284,669 ordinary shares as part of our capital management program. During fiscal 2004, we also completed an off-market share buy-back of 238,241,174 ordinary shares. Refer to note 18 for further details.

~~Telstra~~Video ~~Corporation~~Streaming ~~Limited~~is ~~and~~taking ~~controlled entities~~ off

~~Statement~~Streaming ~~of Changes in Shareholders’ Equity (continued)~~ Users

~~for the year ended 30 June 2005~~ Users

Telstra Entity
				Asset
	Contributed			revaluation		Retained
	equity			reserve		profits			Total
	$m			$m		$m			$m
Balance at 30 June 2002		6,433			277		6,907			13,617
- increase to opening retained profits on adoption of new accounting standard		—			—		1,415			1,415
- net profit		—			—		2,251			2,251
- dividends (note 7)		—			—		(3,345	)		(3,345	)
Balance at 30 June 2003		6,433			277		7,228			13,938
- net profit		—			—		4,379			4,379
- share buy-back		(360	)		—		(649	)		(1,009	)
- dividends (note 7)		—			—		(3,186	)		(3,186	)
Balance at 30 June 2004		6,073			277		7,772			14,122
- net profit		—			—		4,645			4,645
- share buy-back		(280	)		—		(476	)		(756	)
- dividends (note 7)		—			—		(4,131	)		(4,131	)
Balance at 30 June 2005		5,793			277		7,810			13,880

Jan-06 Feb-06 Mar-06 Apr-06 May-06

11 Streaming Revenue

Free Comm Games

$ Streams 0 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Page 3 Version 1

~~Telstra~~Browsing ~~Corporation~~& ~~Limited~~video ~~and controlled entities~~ calling

~~Notes~~Apr to‘06 ~~the~~63% ~~Financial~~active ~~Statements~~ BigPond mobile users 19% active video callers

140% had a chargeable event,... ~~Summary~~and ofcarriage ~~accounting~~is ~~policies~~ also charged

InPage ~~this~~4 ~~financial~~Version report, we, us, our, Telstra and the Telstra Group — all mean Telstra Corporation Limited, an Australian corporation, and its controlled entities as a whole. Telstra Entity refers to the legal entity, Telstra Corporation Limited. 1

Our financial or fiscal year ends on 30 June. Unless we state differently, the following applies:

• year, fiscal year or financial year means the year ended 30 June; • balance date means the date 30 June; and • 2005 means fiscal 2005 and similarly for other fiscal years.

The principal accounting policies we used in preparing the financial report of the Telstra Entity and the Telstra Group are listed below. These are presented to assist your understanding of the financial reports. These accounting policies are consistent with those adopted in previous periods, unless a change in accounting policy has been made and brought to your attention.

1.1 Basis of preparation of the financial report

This financial report is a general purpose financial report prepared in accordance with:

• the Australian Corporations Act 2001; • Accounting Standards applicable in Australia; • other authoritative pronouncements of the Australian Accounting Standards Board; • Urgent Issues Group Consensus Views; and • Australian generally accepted accounting principles (AGAAP).

This financial report is prepared in accordance with historical cost, except for some categories of investments that are equity accounted. Cost is the fair value of the consideration given in exchange for net assets acquired.

In preparing this financial report, we have been required to make estimates and assumptions that affect:

• the reported amounts of assets and liabilities; • the disclosure of contingent assets and liabilities; and • revenues and expenses for the year.

Actual results could differ from those estimates.

Note 30 contains a reconciliation of the major differences between our financial report prepared under Australian generally accepted accounting principles (AGAAP) and those applicable under United States generally accepted accounting principles (USGAAP).

United States dollar conversions

This financial report has been prepared using Australian dollars (A$). For the convenience of readers outside Australia we have converted our statement of financial performance, statement of financial position, statement of cash flows and USGAAP disclosures from A$ to US$ for fiscal 2005.

These conversions appear under columns headed “US$m” and represent rounded millions of US dollars. The conversion has been made using the noon buying rate in New York City for cable transfers in non-US currencies. This rate is certified for custom purposes by the Federal Reserve Bank of New York. The rate on 30 June 2005 was A$1.00 = US$0.7618.

These conversions are indicative only and do not mean that the A$ amounts could be converted to US$ at the rate indicated.

1.2 Change in accounting policies

No accounting policy changes occurred during fiscal 2005.

The following accounting policy changes occurred during fiscal 2004.

Revenue arrangements with multiple deliverables

It is our policy to prepare our financial statements to satisfy both AGAAP and USGAAP in relation to revenue recognition and, in cases where there is no conflict between the two, we ensure that we incorporate the more detailed requirements in both AGAAP and USGAAP financial statements.

In November 2002, the Emerging Issues Task Force in the US reached a consensus on Issue No. 00-21 (EITF 00-21), “Revenue Arrangements with Multiple Deliverables”. EITF 00-21 is applicable to us from 1 July 2003.

EITF 00-21 requires that where two or more revenue-generating activities or deliverables are sold under a single arrangement, each deliverable that is considered to be a separate unit of accounting under EITF 00-21 should be accounted for separately. When the deliverables in a multiple deliverable arrangement are not considered to be separate units of accounting, the arrangement is accounted for as a single unit.

We allocate the consideration from the revenue arrangement to its separate units based on the relative fair values of each unit. If the fair value of the delivered item is not available, then revenue is allocated based on the difference between the total arrangement consideration and the fair value of the undelivered item. The revenue allocated to each unit under EITF 00-21 is then recognised in accordance with our revenue recognition policies described in note 1.21 “Revenue recognition”.

~~Telstra~~Wireless ~~Corporation~~Broadband ~~Limited~~Strong ~~and~~growth ~~controlled~~during ~~entities~~ 2005

~~Notes~~Acceptance toby ~~the~~corporate ~~Financial~~and ~~Statements~~enterprise ~~(continued)~~ IT groups

1.Productivity ~~Summary of accounting policies (continued)~~ gains

~~1.2~~aQuick ~~Change~~issue inresolution ~~accounting~~aEasy ~~policies~~collaboration ~~(continued)~~ with distributed work teams

WePage ~~have~~5 aVersion ~~number of arrangements with our customers that are considered to be distinguishable into separate units of accounting under EITF 00-21. These are:~~ 1

• mobile handsets that are offered as part of a mobile network contract or sold as part of a prepaid phone package; • broadband internet installation kits, where a modem is provided, and satellite internet packages; and • advertising in the Yellow Pages printed and online directories.

We assessed the requirements of EITF 00-21 and determined that there was no material impact on our statement of financial performance or statement of financial position as at, and for the year ended, 30 June 2004 and 30 June 2003 in relation to these arrangements.

1.3 Recently issued accounting standards to be applied in Australia in future periods

The adoption of the Australian equivalents of International Financial Reporting Standards (A-IFRS) will apply in future financial reports. Refer to 1.4 Adoption of International Financial Reporting Standards for the impact we are expecting these standards to have on Telstra.

1.4 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.

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 1.4 (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 1.4 (j).

~~Telstra Corporation Limited and controlled entities~~ Applications

~~Notes~~Applications tocommunity ~~the Financial Statements (continued)~~ maturing

1.aTransport ~~Summary~~Logistics ofaMining ~~accounting policies (continued)~~ aHealthcare

~~1.4 Adoption of International Financial Reporting Standards (continued)~~Benefits

~~(a) AASB~~aBetter 2:resource ~~“Share-Based~~utilisation ~~Payment”~~aImproved ~~(AASB~~customer 2) service

~~Under~~Page ~~current~~6 ~~AGAAP~~Version 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. 1

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.

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.

• 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

~~Telstra~~Lifesaving ~~Corporation~~— ~~Limited~~will ~~and~~go ~~controlled~~mobile ~~entities~~ with broadband

~~Notes~~Page to7 ~~the~~Version ~~Financial Statements (continued)~~ 1

1. Summary of accounting policies (continued)

1.4 Adoption of International Financial Reporting Standards (continued)

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

•		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.

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.

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 1.4 (e), and a decrease of $138 million for the tax effect of the transitional adjustment relating to borrowing costs as detailed in note 1.4 (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 1.4 (e), and a decrease of $129 million for the tax effect of the transitional adjustment relating to borrowing costs as detailed in note 1.4 (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 to a balance of nil, as a result of these entries.

~~Telstra~~More ~~Corporation~~content! ~~Limited~~Example : AFL / NRL Broad range of AFL / NRL content to our 2G and ~~controlled~~3G ~~entities~~ customers Access to exclusive mobile video including AFL /NRL match highlights News, Q4 news desk, tribunal, fixture, player profiles, club pages & results Good example of “next generation” technical and business challenges Page 8 Version 1

Notes to the Financial Statements (continued)

1. Summary of accounting policies (continued)

1.4 Adoption of International Financial Reporting Standards (continued)

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, 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.

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.

(d) 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.

(e) 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 1.4 (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.

~~Telstra~~Reducing ~~Corporation Limited and controlled entities~~ complexity

~~Notes~~Device tomanufacturers ~~the~~improving ~~Financial~~in ~~Statements~~device ~~(continued)~~ usability

1.“Walk ~~Summary~~Out ofUsing” ~~accounting~~— ~~policies~~Telstra ~~(continued)~~ initiative to enable all devices “out of the box”

~~1.4~~aRequires ~~Adoption~~close ~~of International Financial Reporting Standards (continued)~~cooperation

~~(e) AASB~~across ~~119: “Employee Benefits” (AASB 119) (continued)~~ Telstra

~~Comparative~~with ~~information~~ key device, application and infrastructure partners

~~The~~Increases ~~cumulative~~useage 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. revenue

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

~~(f) AASB~~Page ~~121:~~9 ~~“The~~Version ~~Effects of Changes in Foreign Exchange Rates” (AASB 121)~~ 1

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.

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

(g) AASB 123: “Borrowing Costs”

Telstra ~~Corporation~~Technology ~~Limited and controlled entities~~ Roadmap

~~Notes~~Page to10 ~~the~~Version ~~Financial Statements (continued)~~ 1

1. Summary of accounting policies (continued)

1.4 Adoption of International Financial Reporting Standards (continued)

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

Comparative information

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

“Interests in Joint Ventures” (AASB 131)

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 1.4 (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 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)

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.

~~Telstra~~3G ~~Corporation~~City ~~Limited~~To ~~and~~Country ~~controlled~~A ~~entities~~ game changing move

~~Notes~~Most topervasive, ~~the~~homogeneous, ~~Financial~~high ~~Statements~~capacity ~~(continued)~~ wireless network in Australia’s history

1Once the new HSDPA network is complete, it will provide: aGreater than 98% population coverage a1.6 ~~Summary~~million square kilometres of ~~accounting~~coverage ~~policies~~aConsistency ~~(continued)~~ of services in metropolitan and country areas

~~1.4~~Page ~~Adoption~~11 ofVersion ~~International Financial Reporting Standards (continued)~~1

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

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

Comparative information

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

~~Telstra~~Orange ~~Corporation~~areas ~~Limited~~combined ~~and~~represent ~~controlled~~City ~~entities~~ to Country coverage equal to CMDA coverage today

~~Notes~~Page to12 ~~the~~Version ~~Financial Statements (continued)~~ 1

1. Summary of accounting policies (continued)

1.4 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) (continued)

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.

~~Telstra~~3G ~~Corporation~~City ~~Limited~~To ~~and controlled entities~~ Country

~~Notes~~3GSM tofamily ~~the~~of ~~Financial Statements (continued)~~ technologies

1.a82% ~~Summary~~ of ~~accounting~~the ~~policies~~global ~~(continued)~~ digital mobile market a1.8 billion mobile users globally

~~1.4~~Average ~~Adoption~~data rates between 500kbps and 1Mbps at launch of ~~International~~the ~~Financial Reporting~~new ~~Standards~~HSDPA ~~(continued)~~ network

~~(l) Summary~~Simplified ofintegration ~~transitional~~aApplications ~~adjustments~~ developed for one technology Page 13 Version 1

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 1.4 (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 1.4 (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		1.4	(a)		687		—			3			690
Trade and other receivables		1.4	(a)		3,608		(24	)		—			3,584
Inventories					229		—			—			229
Other assets		1.4	(j)		803		(491	)		—			312
Total current assets					5,327		(515	)		3			4,815
Non current assets
Trade and other receivables		1.4	(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		1.4	(f),(g)		22,863		—			(393	)		22,470
Intangibles — goodwill		1.4	(f)		2,104		—			(314	)		1,790
Intangibles — other		1.4	(f),(j)		1,501		2,817			(49	)		4,269
Defined benefit pension asset		1.4	(e)		—		—			537			537
Other assets		1.4	(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~~Significant ~~Corporation~~platform ~~Limited and controlled entities~~ simplification

~~Notes~~2G to2.5G ~~the~~3G ~~Financial~~Super ~~Statements~~3G ~~(continued)~~ 4G

~~1. Summary of accounting policies (continued)~~ Sharing

~~1.4 Adoption of International Financial Reporting Standards (continued)~~ HSDPA1

3GSM 10 Mbps & 2 1 Gbp peak (lWCDMA ) ~~Summary~~100 ofMbps ~~transitional~~peak ~~adjustments~~550-1100 Kbps (~~continued~~target goal) 220-320Kbps (target goal) GSM GPRS EDGE 9Kbps 30-40 Kbps 100-130 Kbps Telstra Today

							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		1.4 (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

Deployed Active rollout

22 Wide Area Wireless Retaining option

Not currently

Short Range IP pursuing WiFi Wireless Page 14 Version 1

~~Telstra~~Customer ~~Corporation~~benefits ~~Limited~~For ~~and~~city-based ~~controlled entities~~ customers:

~~Notes~~Significantly improved coverage compared to ~~the~~their ~~Financial~~GSM ~~Statements~~service ~~(continued)~~ today

1.For ~~Summary~~country ~~of accounting policies (continued)~~ customers:

~~1.4~~Improved ~~Adoption~~city ofcoverage, ~~International~~wireless ~~Financial~~broadband ~~Reporting~~and ~~Standards~~3G ~~(continued)~~ services

~~(m) Statement~~For ofall ~~changes~~3G850 incustomers: ~~shareholders’~~Better ~~equity~~ in-building coverage

~~The~~Much ~~following~~improved ~~statement~~international 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 1.4 (k) for further information. roaming

~~Any~~Available ~~transitional~~across ~~adjustments~~a ~~identified~~national ~~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.~~ network!

~~There~~Page ~~are~~15 ~~certain~~Version ~~items that still require resolution. We have not recognised a deferred tax liability in relation to indefinite lived intangibles as detailed in note~~ 1.4 (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 1.4 (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		1.4	(a)		(174	)		—			—			—		—		—			—		(174	)
Shares held by employee share plan trusts		1.4	(a)		(117	)		—			—			—		—		—			—		(117	)
Services received under employee share plans		1.4	(a)		4			—			—			—		—		(4	)		—		—
Share-based payments		1.4	(a)		—			—			—			—		—		55			—		55
Carrying value differences from the tax base		1.4	(c)		—			(32	)		—			—		—		(202	)		—		(234	)
Net defined benefit pension asset		1.4	(e)		—			—			—			—		—		400			—		400
Retranslation of overseas goodwill balances		1.4	(f)		—			—			(297	)		—		—		—			—		(297	)
Resetting the foreign currency translation reserve to zero		1.4	(f)		—			—			343			—		—		(343	)		—		—
Expensing of borrowing costs previously capitalised		1.4	(g)		—			—			—			—		—		(321	)		—		(321	)
Equity accounting for Reach Ltd		1.4	(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~~Progress ~~Corporation~~to ~~Limited and controlled entities~~ date

~~Notes~~Network todeployment ~~the Financial Statements (continued)~~ progressing

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