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Telstra Corp. Ld (50IM)

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Wednesday 03 April, 2002

Telstra Corp. Ld

Listing Particulars - Part 2

Telstra Corporation Ld
28 March 2002



PART 2


                                      BUSINESS

History and development

Our origins date back to 1901, when the Postmaster-General's Department was
established by the Commonwealth Government to manage all domestic telephone,
telegraph and postal services. The Overseas Telecommunications Commission (OTC)
was established in 1946 to manage Australia's international telecommunications.

The Australian Telecommunications Commission, trading as Telecom Australia, was
created as a separate entity in July 1975 following the break up of the
Postmaster-General's Department. While continuing to trade as Telecom Australia,
the Commission became the Australian Telecommunications Corporation in January
1989. OTC and Telecom Australia became the Australian and Overseas
Telecommunications Corporation Limited following a merger in February 1992.

Telstra Corporation Limited became the legal corporate name of the merged entity
in April 1993. The domestic trading name, Telecom Australia, was changed to
Telstra on July 1, 1995 to distinguish Telstra from other telecommunications
companies in increasingly competitive and deregulated markets. The company has
been trading as Telstra internationally since 1993.

We were incorporated as an Australian public limited liability company on
November 6, 1991. Following the opening of Australia's telecommunications
markets to full competition in July 1997, we underwent a partial privatisation
in November 1997, under which the Commonwealth sold approximately 33.3% of our
issued shares to the public. Since the initial privatisation, those of our
shares that are not held by the Commonwealth, are quoted on the Australian Stock
Exchange and on the New Zealand Stock Exchange. American depositary shares, each
representing five shares evidenced by American depositary receipts, have been
issued by the Bank of New York, as depositary, and are listed on the New York
Stock Exchange. A further global offering by the Commonwealth of 16.6% of our
issued shares was completed in October 1999. The Commonwealth currently owns
50.1% of our issued shares, and is required by legislation to own at least that
much.

Organisational structure

Our internal organisational structure continues to evolve to meet the needs of
the market environment in which we operate. At July 1, 2000, we had four
strategic business units. In March 2001, a separate business unit, Telstra
International, was established, and in July 2001 Infrastructure Services and
Wholesale was divided into two separate business units.

Our current structure consists of six strategic business units and is outlined
below.

Strategic business units

• Domestic Retail: Our domestic retail business is divided into three strategic
business units: Telstra Retail, Telstra Mobile and Telstra Country Wide and is
responsible for approximately 8.8 million Australian fixed line services
(comprising 5.8 million Telstra Retail services and 3 million Telstra Country
Wide services) and 5.2 million mobile services.

• Telstra Retail: provides a number of services, primarily sales, marketing,
products service innovation, customer care and billing. Telstra Retail also
manages our information, connection and public payphone services, as well as our
advertising and directories business. In addition, it sells and provides
customer services for a comprehensive range of products, services and customer-
driven solutions ranging from basic telephony services to complex voice and data
networks.

• Telstra Mobile is responsible for our mobile and wireless networks and
associated systems within Australia. It provides for all mobile retail sales and
after sales support, customer service, product development and pricing.

                                         S-47

• Tetstra Country Wide is responsible for providing telecommunication services
to customers in regional, rural and remote parts of Australia. This business
unit was formed in June 2000, with a key strategy to establish a strong presence
in regional Australia. Telstra Country Wide is responsible for the
telecommunications needs of consumers and businesses that reside and operate
outside the mainland major metropolitan areas and in all of Tasmania, the
Northern Territory and overseas territories.

• Telstra Wholesale: Among the services Telstra Wholesale provides are
interconnection services, access to our network facilities and transmission
services. Our wholesale customers include licensed carriers, carriage service
providers and internet service providers (ISPs).

• Telstra International manages our international interests and directs our
offshore growth strategy.

• Infrastructure Services is responsible for research and development, planning,
design, construction and operation of our communications networks and our
associated systems that deliver technology solutions, and our products, services
and customer support. It also has responsibility for customer service,
installation and repairs. In July 2001, we announced that our wholly owned
subsidiary, NDC, would become part of the portfolio of Infrastructure Services.
NDC competes for some of our annual network expenditure against other suppliers.
It also performs construction activities for others, including other
telecommunications companies.

Corporate centre functions

• Finance & Administration is responsible for strategic planning and investment
opportunities and provides corporate policy and support functions, including
finance, risk management and assurance, shared services for processing
functions, treasury, investor relations, productivity directorate and other
corporate services.

• Legal & Regulatory provides legal services and corporate secretarial functions
and has responsibility for regulatory positioning and negotiation, including
assessment of regulatory decisions and preparation of submissions to industry
regulators.

• Human Resources manages personnel, organisational effectiveness, health and
safety, remuneration, training and leadership development programmes.

• Corporate Relations manages corporate communications, including media
relations, employee communications and external relations, including government
affairs.

Marketing and customer service

We believe our future competitive advantage will come from providing customers
with product and service packages and solutions that meet their total
communications requirements. We are committed to customer service and have
adopted a customer service charter.

We approach each market segment from a customer's perspective to give us a
better understanding of their key communications needs.

We customise for each segment our:

• advertising and promotions;

• customer contact and sales channels;

• product design and support; and

• product and service packages.


                                        S-48


We own and operate over 100 shops nationwide and have approximately 43 Telstra
licensed stores that sell a range of consumer communications products, including
mobile telecommunications services.

We also sell our services:

• through external channels consisting of third party retail stores, dealers and
independent contractors; and

•to wholesale customers who package our products as solutions to their retail
consumer market.

Residential customers and small businesses

We segment our residential customers based on their usage patterns, allowing us
to match their telecommunications requirements to changes in lifestyle needs. We
segment most of our small business customers into three small business segments
based on the type of business they operate and their customer interface. This
segmentation allows us to match their telecommunications requirements to meet
the needs of their own customers.

We incorporate segment information into our sales systems so we can tailor our
marketing to meet the needs of particular customers. This information assists
the customer-driven sales approach used by our sales consultants. Customers are
able to interface with us on-line, face to face via our shops and door-to-door
sales representatives, and through our phone sales channels. Our phone sales
channels are equipped with technology to help our customers reach a customer
service representative who can help them with their specific requirements. Our
field sales force markets tailored products and services to small business and
residential customers. We also conduct telemarketing campaigns from our national
telemarketing centre.

Regional, rural and remote customers

Telstra Country Wide was established to improve service levels and business
performance and to strengthen relations with customers and communities outside
the mainland major metropolitan areas in Australia, in all of Tasmania and the
Northern Territory and overseas territories.

Through an organizational network led by 28 regionally-based area general
managers across four regions, the sales, marketing, customer service,
installation and fault repair requirements of customers in regional, rural and
remote Australia are being addressed at a local level.

Medium and large businesses and governments

We provide medium and large businesses and Australian federal, state and
territory governments with a comprehensive range of products and services, from
basic services to complex voice and data networks and totally managed solutions.
We have segmented our medium and large business and government customer base by
size and industry to help identify their key business drivers and
telecommunications needs and to develop appropriate product packages.

Our account managers are supported by specialised presales consultants,
engineers, communications consultants and technical design specialists. This
team is backed by customer ordering and provisioning, billing and service
assurance systems specifically developed to meet the needs of this sector. In
addition, a variety of indirect channels, such as dealers, service providers,
equipment suppliers and other alliances and partners are designed to service our
business and government customers' needs in a cost effective manner.

A key strategic initiative in customer relationship management is underway to
aggregate the customer information (including small businesses) to improve the
service we can offer and to broaden our relationship with customers in full
compliance with existing privacy requirements.

                                         S-49


International businesses

We have international sales and technical professionals in Australia and
overseas to service our multinational customers. Through our own capacity,
strategic alliances and ventures, we offer voice, data and wireless services,
internet, network management and call centre solutions internationally, with
particular strength in the Asia-Pacific region.

Mobile telecommunications customers

Telstra Mobile offers mobile services on both our GSM and CDMA digital networks.
We have recently established a new marketing division and realigned our customer
segmentation to focus more closely on the particular telecommunications needs of
each customer group.

We meet the sales and service needs of our customers directly through internet,
telephone, Telstra shops, Telstra licensed stores, Telstra business stores and
indirectly through more than 3,000 retail outlets nationwide through our channel
partners.

Medium and large business customers are serviced through Telstra Retail.

Directory services

We distribute printed White Pages(TM) directories and Yellow Pages(TM)
directories to virtually every household and business in Australia. Both
directories are available in print, voice and on-line media and White Pages(TM)
directories are also available on CD-Rom. Over 400,000 customers advertise in
our directories. We advertise and promote our directory products to end users to
enhance the value of the directory products as an advertising medium. At the
same time, we promote our products directly to advertisers.

Pay television

We own 50% of FOXTEL, Australia's leading pay television provider with
approximately 774,000 subscribers at December 31, 2001. FOXTEL currently
provides over 40 television channels, including movies, sports, news and other
entertainment channels as well as re-transmission to cable customers of the five
free-to-air television networks. Each of Publishing and Broadcasting Ltd (PBL)
and The News Corporation Limited has a 25% interest in FOXTEL.

On-line services subscribers

We market our Telstra BigPond(TM) dial-up and broadband internet on-line
services widely, with sales of Telstra BigPond(TM) products made through a
number of channels, including retail outlets, direct Telstra sales channels and
directly over the internet. Customer service for Telstra BigPond(TM) and our
portal, telstra.com(R), is provided by telephone-based support staff in addition
to e-mail based support.

Wholesale customers

We have established a dedicated business unit to service the needs of our
wholesale customers under our wholesale brand-Telstra Wholesale. Our wholesale
customers include licenced carriers, carriage service providers and ISPs. We
intend to continue extending our wholesale product range. We now provide our
customers automated on-line interfaces on our website, telstrawholesale.com.

Products and services

We offer a broad range of telecommunications and information products and
services to a diverse customer base.

                                         S-50


Basic access

We provide basic access services to most homes and businesses in Australia. We
also sell access services to carriage service providers who then sell these
services to their customers. Our basic access service consists of installing,
renting and maintaining connections between our customers' premises and our PSTN
to provide basic voice, facsimile and internet services. Our basic access
service does not include enhanced products like ISDN access, ADSL and
FaxStream(R) services. These are recorded under 'Data and internet services'.

We charge our customers fees for connecting new services and reconnecting
existing services. We charge all our residential customers approximately the
same rates for basic access service even though it is more expensive for us to
provide basic access service to our customers located in rural areas than in
metropolitan areas. Consequently, a portion of the call revenue we receive from
our urban residential customers subsidises our costs of providing basic access
service to our rural customers.

Housing growth and customer requirements for additional basic access services
drive demand for residential basic access services. Demand for commercial basic
access services has historically tracked economic growth in Australia. Growth in
basic access services has slowed in recent years but this has been offset, to
some extent, by our success in encouraging customers to adopt alternative access
services that have more capabilities, such as ISDN services and now internet
access products. Growth in the number of in-home offices and increasing demand
for integrated voice and data services has caused some of our customers to
switch to these alternative access services.

Demand for additional services arises from increasing customer convenience
requirements, internet access demand and demand for other services, such as
dedicated voice, electronic funds transfer and facsimile lines. 

Although our ability to promote additional services has in some cases been
limited by existing capacity in our customer access network, we market
additional services in areas where we have capacity available. In some areas, we
augment our network capacity with technologies, such as pair gain systems, line
concentrators, fixed radio access and ISDN. ADSL will alleviate the shortage of
copper pairs for second services.

During the last three years, we have been selectively upgrading our customer
access network to reduce the number of faults and thereby improve our service
levels. This upgrade has also assisted us to meet the demands for service in a
more timely way and provide our network with additional capacity for further
line growth. 

In fiscal 2001, and in the first quarter of fiscal 2002, further rebalancing
occurred involving increasing line rentals to recoup the actual cost of
providing network services and to offset, in part, decreasing call prices.

Effective August 1, 2001, we have introduced two new calling plans, the wide
area call plan, and a regional call plan. These new calling plans can benefit
eligible customers living in outer metropolitan areas who have historically been
just outside the local call distance to the city and country customers just
outside local call distance from their nearest major town.

Local calls

We provide local call services to most residential and business customers in
Australia. We generally charge for local calls on an untimed per call basis and
we charge a lower rate for calls within the same exchange area, referred to as a
Neighbourhood Call(TM). We also provide local call services to carriage service
providers at a commercially negotiated or regulated rate. These carriage service
providers resell local call services and bill their customers directly.

In fiscal 2001 we were successful in winning a A$150 million Commonwealth
Government tender to provide untimed local rate calls to improve
telecommunications for customers in extended zones, which are rural and remote
zones that cover approximately 80% of the Australian continent. As part of this
project, we are currently in the process of providing temporary satellite
services to supplement capacity and upgrading the radio sections of our
telecommunications infrastructure to not only provide untimed local rate calls
but to significantly improve services in these areas.

                                        S-51

National long distance calls

We are the leading provider of national long distance services in Australia.
This comprises fixed-to-fixed long distance calls and fixed-to-mobile calls made
from our PSTN network. We provide these services to our residential and business
customers. We also provide national long distance services to other carriers for
resale.

We charge for national long distance calls on a timed basis after a call
connection fee. Different rates apply for fixed-to-fixed and fixed-to-mobile
calls. These charges usually depend on the duration, destination, time of day
and day of the week of the call but are also offered on a capped price basis.
During fiscal 2001 we introduced a suite of calling options to allow our
customers to choose the package most suitable for their individual needs. 

In addition, we offer a variety of specials to increase the use of our network 
in low demand periods.

International telephone services

We are the leading provider of international telephone services in Australia. We
offer our customers international telephone services to more than 230 countries
and territories. In addition, through Reach, we offer international outbound
telephone services on a wholesale basis.

We generally charge for international telephone calls on a per second basis
after a call connection fee. The charge usually depends on the duration of the
call and the destination of the call regardless of the time of day or day of the
week on which the call is made. Our Easy 1/2 Hours(R) service allows customers
to purchase calls in 30 minute blocks of time using a specific dialling code
(0018). In the first quarter of fiscal 2002, a new 0011 tenminute capped call
offer was introduced for HomeLine(TM) Plus and BusinessLine(TM) Plus customers
to encourage more frequent calling overseas. We also market a range of permanent
and special offers to attract new customers and encourage existing customers to
call more often.

Residential customers make the substantial majority of our international
outgoing calls. These customers tend to treat international calls as a
discretionary expense, more so than national long distance calls. As prices have
fallen, our customers have made more calls for longer periods of time.

During fiscal 2001, the top three destinations for outgoing traffic and the top
three sources for incoming traffic are shown in the table below:

Country                              Percentage of total   Percentage of total     
                                     outgoing minutes(1)   incoming minutes(1)

United Kingdom. . . . . . . .                 20                   15
United States . . . . . . . .                 16                   23
New Zealand . . . . . . . . .                 15                   20


(1) Figures quoted are those used for settlement purposes.

Our overseas wholesale customers are now managed by Reach. Prior to the creation
of Reach, inbound and outbound traffic on the international network was
delivered largely under bilateral contracts with major overseas carriers. The
international network was also used to source and deliver transit traffic. We
now have a services agreement with Reach to cover these arrangements.

Reach pays us for international traffic that terminates in Australia. These
termination charges are based on the cost of delivering traffic to destinations
in Australia, using the domestic network, rather than the previous bilateral
arrangements, which were based on the cost of using the international network,
and were specific to each country of origin.

                                        S-52
Mobile goods and services

We are the leading provider of mobile telecommunications services in Australia
in terms of the number of customers and the geographical coverage of our
services.

The mobile telecommunications market in Australia is characterised by a
significant degree of penetration which we estimate at over 60% of the
Australian population at June 30, 2001. With our expansion into mobile data
technology, we also provide our customers with a range of information services.

The Australian mobile telecommunications market is highly competitive. To
compete in this market, we rely on:

• our innovative marketing plans;

• using a number of different distribution methods to deliver our products and 
  services to our customers;
  and

• our well-known brand name.

Our mobile telecommunications services include:

• digital cellular services;

• sales of mobile handsets; and

• a wide range of added features and functions.

Our digital mobile service allows customers to send and receive voice and data
calls. We also offer our mobile customers additional services, including:

• voicemail;

• call waiting;

• call forwarding;

• mobile facsimile and data services;

• operator assisted paging;

• operator through connect;

• SMS;

• WAP services, including content such as financial information, sports, e-mail,
  weather, flights and directories;

• packet data services using GPRS; and

• other information services available through telstra.com(R).

We believe that these additional services enhance customer loyalty and
satisfaction and increase customer use of our mobile telephone service.

We offer our mobile customers different pricing options that vary depending on
committed usage rates and length of contract. We also offer pre-paid and post-
paid payment options to our mobile customers. Our mobile customers who opt for a
higher monthly access fee generally pay a lower air-time charge. We ceased
subsidisation of the cost of handsets as a general marketing strategy in January
2002. However, it remains possible that Telstra Mobile will use handset
subsidies in a targeted manner in the future for specific promotions or to drive
market penetration of new technologies.

In February 2001, we acquired a controlling interest in RWC which owns 100% of
Hong Kong CSL, one of the leading providers of mobile services in Hong Kong.

                                        S-53

GSM digital service

Our digital GSM network covers an area which includes more than 95% of the
Australian population. We have continued to expand our digital GSM coverage into
regional centres and along highways that link regional centres. We have also
focused on improving depth of coverage in major cities, particularly in-building
and underground coverage. We offer international roaming in approximately
90 countries.

The number of our GSM digital mobile customers has increased rapidly since we
introduced GSM digital services in 1993. We attribute this growth to:

• increasing recognition of the value of mobile service by both business and 
  private users;

• the coverage and enhanced features of our GSM digital service; and

• our strong distribution capabilities, particularly in retail stores.

CDMA digital service

Our CDMA network offers the largest cellular mobile phone coverage in Australia,
reaching more than one million square kilometers, an area which includes more
than 97% of the population. CDMA has a number of advantages over GSM in some
applications for users who require wider service coverage, faster data speed and
reduced background noise than circuit-switched GSM.

Analogue service

Our analogue network was completely closed in fiscal 2001 as required by 
Australian law.

Data and internet services

We provide the following:

• data network and internet services; and

• wideband IP, private IP solutions and dial IP.

We also provide WAN solutions such as:

• domestic and international frame relay; and

• domestic and international ATM, international private lines and global private 
  IP.

Other services include:

• dedicated network solutions, such as digital data services, voice grade 
  dedicated lines, packet switched services, media, audio and video network 
  services; and

• internet access (Telstra's ISP service-Telstra BigPond(TM) Home, Telstra 
  BigPond(TM) Business, Telstra BigPond(TM) Broadband, Telstra BigPond(TM) 
  Direct and specialised applications (security services and applications and 
  hosting)).

The current telecommunications trends indicate increased and more sophisticated
computer networking by business customers. This is coupled with the demand for
higher speed services and a shift from dedicated to switched data services, in
particular towards IP environments. IP networking offers the potential for not
only data, but also multimedia and voice applications to be carried over the
same networking solution.

Our data strategy is based on the early delivery of new generation IP and
internet services and is driven by:

• businesses embracing new IP/internet based technologies and services;

• customer demand for higher capacity services; and

• customer need for competitive, cost-effective global solutions.

                                        S-54


We are also leveraging our strong position as a provider of data and IT products
and our existing competencies in supplying corporations' outsourcing
requirements to provide managed storage systems and managed hosting solutions.

The services we provide vary in bandwidth and also in the degree of network
management and network redundancy provided. We have the skills required to
operate and manage complex IP networks. 

IP enables customers to remotely access their office network, at any time, over
any standard telephone line (PSTN/ISDN) from Australia, or other countries. Our
private IP solutions offer networking which enables businesses to access their
network via frame relay, ISDN, ATM, ADSL or secure dial up, as suited to the
requirements of each site and application. Customers can rely on the built-in
intelligence and security of Telstra's IP network to manage the routing and
delivery of their valuable data. Our wideband IP service offers bandwidthon-
demand access dynamically controllable through a secure, personalised web page.
This enables local area networking (LAN) between offices to be extended on-
demand to accommodate applications such as large file transfers or video
conferencing.

Telstra BigPond(TM) Direct provides larger corporate, government and wholesale
customers with high quality dedicated Internet access within Australia at
transmission rates up to 155 Mbps via ATM. In addition, we offer a range of
internet products and packages under our Telstra BigPond(TM) brands. Telstra
BigPond(TM) Home and Business offer dial-up modem and ISDN internet services to
residential and business users across Australia through over 100 different
points of presence (PoPs). Telstra BigPond(TM) broadband provides broadband
internet services to consumer and business customers via HFC cable, satellite or
ADSL access technologies. 

During fiscal 2001, we also introduced our MegaPoP(TM) product, which is IP
access for ISPs and carriage service providers supporting public dial up
internet access from PSTN/ISDN.

Transaction services

We offer low speed, switched data services used mainly for electronic funds
transfer and point of sale applications. These services provide a low cost,
dial-up or leased end-to-end connection between remote terminals and central
computers.

We offer a range of electronic commerce services such as electronic data
interchange-based trading networks and business-to-consumer applications to
support on-line payments and general insurance products.

Other data services

We offer other data services, in some cases with business partners, including:

• games-based entertainment, children's education and on-line music services;

• Conferlink(R) services that provide audio, video and internet conferencing;

• V-commerce(TM) services based on interactive voice response technology; and

• administration and support services to funds managers for their back office 
  administration and asset management operations.

Text services

Our text services consist mainly of facsimile products and services marketed 
under our FaxStream(R), brand name.

                                       S-55


On-line services

We are providing more on-line services in response to the demands made by our
customers.

We announced the availability of our on-line communications hub, telstra.com(R)
in March 2000. After registering on the site, a user may personalise the
homepage to suit his or her particular needs and interests. By June 30, 2001
there were approximately 500,000 registered users, which has grown from
approximately 100,000 users at June 30, 2000.

Types of on-line services provided on telstra.com(R) are:

• web-based e-mail that may be accessed from any location;

• a text message to a designated mobile phone service when new e-mails are
received;

• direct access to information on our products that may be purchased on-line;

• payment on-line of an account with us;

• direct access to our current directories databases in White Pages(TM) and
Yellow Pages(TM); and

• news, finance, weather, travel and entertainment updates.

Directory services

We are the main provider of directory services in Australia through our wholly-
owned subsidiary, Pacific Access Pty Ltd.

The directory services we offer include printed White Pages(TM) directories and
Yellow Pages(R) directories, which are also available through voice and on-line
media. The White Pages(TM) directories are also available on CD-Rom. Each
telephone subscriber receives one free listing of name, address and telephone
number in the White Pages(TM) directories and may purchase special listings,
such as bolded printing. Businesses may list their business details in our
Yellow Pages(R) directories free of charge, or purchase premium advertising and
promotional space.

We operate four internet sites that are among the most frequently visited
Australian internet sites:

• the Yellow Pages(R) OnLine site (www.yellowpages.com.au);

• the White Pages(TM) OnLine site (www.whitepages.com.au);

• the GOeureka(TM) site (www.goeureka.yellowpages.com.au); and

• the location and navigation OnLine site Whereis(TM) (www.whereis.com.au).

Through our directories business, we are developing a range of electronic
commerce and internet products and services based on our directory products with
a concentration on areas such as advertising, contact lists, location and
navigation services applications, applications for small and medium businesses
and electronic business solutions. For example, we operate a site dedicated to
the on-line needs of Australia's small and medium enterprises (SME) at
www.pacificaccess.com.au. This site provides on-line information, tools and
applications to help SMEs with their telecommunications and marketing
requirements.

Intercarrier services

In addition to providing services for resale, we provide a range of other
services to carriers and carriage service providers. These include:

• interconnection services including originating and terminating access to our
fixed and mobile networks, preselection services, and access to our network
facilities such as ducts, towers and exchange space;

                                        S-56


• transmission services, including leased lines;

• data services;

• mobile telecommunications services; and

• systems maintenance and billing services.

Inbound calling products

We offer:

• inbound call services including Freecall(TM) 1800, which is a reverse charge
call service used widely by large and small businesses to extend their market
reach and attract sales;

• Priority(R) One3 numbers, used by larger businesses and franchise operations
for service calls;

• Priority(R) One3 caller dependent routing to the nearest business location,
enabling efficient delivery of customer service;

• Priority(R) 1300 services, which provide features equivalent to Freecall(TM)
1800;

• call centre products such as network-based services for business call centres
that include interactive voice response and on-line customer selection menus;
and

• InfoCall(R) 190-telephone premium rate services, where we bill the calling
customers for both content and carriage on our bill and undertake a revenue
share arrangement with the service provider.

We also supply a range of products to our consumer and business customers that
offer alternative billing options, including prepaid cards, automated reverse
charging and calling cards.

Facilities management services

We provide management of all or part of a business customer's IT and/or
telecommunications services, including management of each of the following:

• managed voice services: our network based enhanced voice and data switching
products and IP-VPN products and the provision of related professional services;

• managed data services: our core data products including IP-based network
solutions, ATM, frame relay, ISDN, ADSL and dedicated data network, equipment
and the provision of professional services;

• managed contract services: management of a customer's call or contact centre
including network services, equipment and third party hardware/applications and
professional services;

• managed mobility services: fleet management of mobile phone networks and new
wireless based technologies such as wireless LANs;

• managed IT services: IT based products and services including firewalls,
desktops, peripheral services and application service products; and

• whole of business solutions: complex one-off or whole of business solutions
incorporating a range of the above services.

Payphones

We are the leading operator of public payphones in Australia. As at June 30,
2001, we operated approximately 35,300 public payphones. Other operators have
approximately 39,800 payphones that are connected to a payphone access line
provided by us. Our USO requires us to make payphone services reasonably
accessible throughout Australia, including in non-metropolitan and rural areas.
Approximately half of our public payphones are in these areas.

                                        S-57


Other sales and services

Our other sales and services mainly include domestic information and connection
services, video and teleconferencing, audio and video services and customer
premises equipment, such as branded phones, telephone rental and other
telecommunications equipment.

We provide information and connection services through a number of call centres
in Australia and through White Pages(TM) OnLine and Yellow Pages(R) OnLine.
Between December and March of fiscal 2001, we introduced voice recognition
technology to allow the automation of the 2,000 most frequently requested
numbers. In fiscal 2001, we responded to over 365 million calls with the
majority of these basic operator services being provided without charge to the
customer. For the last two years we have charged for directory assistance
services provided to mobile and business customers. We cannot charge or amend
charges for our directory assistance services without the approval of the
Communications Minister.

Pay television

We own 50% of FOXTEL with each of Publishing & Broadcasting Ltd and The News
Corporation Limited owning a 25% interest. The FOXTEL partners have committed,
with very limited exceptions, to confine their involvement in the provision of
pay television services in Australia to participation in FOXTEL. Publishing and
Broadcasting (PBL) and News Corporation have made long-term programming
commitments to FOXTEL. 

FOXTEL has entered into various programme supply arrangements, including some
with minimum licence fee commitments. At June 30, 2001, the amount of FOXTEL's
fee commitment was A$1,964 million. To the extent that FOXTEL does not meet
these commitments, the FOXTEL partners are jointly and severally liable for any
shortfall.

We are the exclusive long-term supplier of cable distribution services for
FOXTEL's cable pay television services in our cabled areas and we receive a
share of FOXTEL's cable pay television revenues. We have agreed with FOXTEL that
we will not supply pay television distribution services on our broadband cable
network to anyone else unless we are required to do so by law. The Federal Court
decided in August 2000 that this arrangement does not preclude third parties
from obtaining access (pursuant to the telecommunications access regime under
the Trade Practices Act 1974 (Cwth) (TPA)) to our broadband cable network for
the delivery of analogue pay television services.

In April 2001, the ACCC issued interim determinations stating that there was
spare capacity on our HFC cable network and allocated six analogue channels to
access seekers. We and Foxtel have initiated negotiations to assist these access
seekers to gain use of our HFC cable network.

In addition, we can independently, or through partnerships and alliances,
provide a broad range of other communications, data and information services
using our broadband network.

Under arrangement with the FOXTEL partners, FOXTEL may provide, in addition to
pay television services, a limited range of information and other services, but
it may not supply telephony services. Within cabled areas, there are limitations
on FOXTEL's ability to provide services, including on-line services. Outside
cabled areas, FOXTEL may decide to provide a range of information and other
services, including on-line services, but must give preference to us in
partnering to develop those services.

In fiscal 1999, FOXTEL introduced a commercial satellite service which enables
pay television to be delivered to approximately two million homes not passed by
our broadband cable, excluding homes in areas serviced by the Australian pay
television provider, Austar. FOXTEL has licensed movie programming to Austar for
satellite delivery in areas serviced by Austar on an exclusive basis, with the
effect that FOXTEL may not provide a satellite service containing this
programming in those areas.
                                         S-58

In 2001, FOXTEL acquired the pay television rights to the Australian Football
League (AFL). The AFL is a major component of sports viewing in Australia. Under
the terms of the agreement, FOXTEL has acquired the exclusive pay television
rights to all AFL matches for a term of five years commencing in 2002. The
agreement also obliges FOXTEL to offer some form of AFL to the other pay
television operators, namely Austar and Optus. However, FOXTEL is free to set
the charge for such a service. FOXTEL has recently entered into agreements with
Austar and Optus to provide them each with an AFL programming service. We have
also recently entered into additional agreements with FOXTEL, as described under
'Recent Developments.'

International investments

A component of our strategy is to expand our business activities outside
Australia, particularly in the areas of wireless telecommunications (both voice
and data) and data, through investment, acquisition or alliance opportunities
generally.

On February 7, 2001 we completed the first stage of our Asian expansion strategy
with the:

• formation of Reach, a 50:50 joint venture which merges our international
infrastructure assets with those of PCCW creating a leading wholesale provider
of voice, data and internet connectivity services in the Asia-Pacific region;

• acquisition of a 60% interest in RWC. RWC currently owns one of Hong Kong's
leading mobiles businesses, Hong Kong CSL, and is intended to be the primary
vehicle for execution of our wireless strategy in Asia. We have board control of
RWC, including the right to appoint the Chairman; and

• purchase of a convertible note from PCCW with a face value of US$750million.
The note is subordinated but is secured by an equitable mortgage over half of
PCCW's 50% shareholding in Reach (i.e. 25% of Reach's total shares).

In December 2001, we acquired an additional 8.43% interest, bringing our total
interest to 58.43%, in our renamed New Zealand joint venture, TelstraClear
Limited, which provides a range of convergent voice, video and data services to
retail and business customers in New Zealand.

We also have a number of smaller off-shore investments and joint ventures, which
include:

• a 35% equity interest in the satellite communications operator, Xantic
(formerly Station 12 B.V.) in the Netherlands; and

• a 39.9% equity interest in Australia-Japan Cable Holdings Limited, a network
cable provider, based in Bermuda.

Networks and systems

We operate fixed and mobile telecommunications networks to support our diverse
range of products and services. An extensive national and international
transmission infrastructure and a largely centralised network management centre
supports our networks. We have centralised the operational management of our
core networks by establishing a single global operations centre. Our global
operations centre has a disaster recovery back-up facility in an alternative
location.

We invest a substantial amount of capital and other resources in our networks
and systems. For example, we have completed deployment of a new digital mobile
network based on CDMA, which has replaced our analogue mobile network. We also
incur expenditures to upgrade services available on the customer access network.
In addition, we have ongoing programmes to:

• improve work practices and streamline processes;

                                        S-59

• eliminate duplication of overhead costs; and

• improve record keeping for property, plant and equipment.

In addition to our capital expenditure programme, we spent A$29 million in
fiscal 2001, A$29 million in fiscal 2000 and A$34 million in fiscal 1999 on
research and development. These amounts do not include labour and depreciation.
Our research and development activities cover diverse areas of our business and
focus on developing new competitive products for our customers.

We intend to continue to selectively invest in our networks and systems,
particularly to cater for the increasing demand for data services such as
internet services. Data traffic has grown to such an extent that its volume now
exceeds that of voice traffic on our networks.

The nature of data technologies is continuing to evolve from a multiservice ATM
frame relay IP environment, towards a pure IP environment. We are well
positioned to support both ATM frame relay and IP in the medium term. Future
investment will focus on cost-optimised, carrier-grade IP networking. 

We are increasing our support of services that require high bandwidth by
continuing the roll out of various technologies, such as ADSL, or, where
appropriate, satellite-based services, in addition to our existing HFC cable.

The Infrastructure Services group ensures that there is alignment across all
systems and network related activity and develops and has responsibility for our
network and IT strategy and architecture.

Competition

Competition in Australia's telecommunications industry began in 1989 when
competitors began to provide a limited number of services in the market. In
1991, competitors started reselling our services, particularly national long
distance and international telephone services. Competition intensified in 1992
when Cable & Wireless Optus entered the Australian telecommunications market and
began reselling our analogue mobile telephone service and offering national long
distance and international telephone services. We started offering digital
mobile telephone services over our own network in 1993. In the same year, Cable
& Wireless Optus and Vodafone Holdings (Australia) Pty Limited began offering
those services over their own networks. 

On July 1, 1997, the Commonwealth Government introduced the current regulatory
regime allowing for open competition. Since then there has been a significant
increase in the number of carriage service providers that have entered the
Australian telecommunications market. At June 30, 2001, we supplied services to
over 100 wholesale customers who compete in the retail telecommunications market
in Australia.

From a position of being the sole provider of telecommunications products and
services in Australia, inevitably, competition has reduced our market share.
However, competition has also contributed to overall market telecommunications
services growth. We expect both these trends to continue but at a lesser rate.

We are permitted to compete in all telecommunications markets throughout
Australia. Our competitors are also permitted to compete in all these markets.
As convergence becomes more prominent, our competitors may seek to take
advantage of their position in one market to enter or improve their position in
another market. 

For more detail on the effect on us of competition regulation in Australia's
telecommunications market, we refer you to our annual report for the year ended
June 30, 2001 filed on Form 20-F and incorporated by reference in the
accompanying prospectus.
                                       S-60 

Regulation

Some of the major features of the Australian telecommunications regulatory
regime are:

• industry specific competition regulation;

• extensive industry specific consumer protection regulation, including price
caps for certain services and regulations relating to the provision of services
in regional and rural areas;

• customer service guarantees in relation to the time taken to provision and
repair standard telephony services;

• industry codes and standards under a self-regulatory regime;

• no limits on the number of carriers;

• carriage service providers with many of the same access rights and obligations
as carriers;

• limited carrier land access rights and statutory immunities; and

• our universal service obligation.

Reviews have been undertaken in fiscal 2001 and are continuing in fiscal 2002 on
some specific telecommunications regulations and industry codes with the most
significant being the Productivity Commission's review of telecommunications
competition regulation.

For more detail on how we are regulated in Australia, we refer you to our annual
report for the year ended June 30, 2001 filed on Form 20-F, and incorporated by
reference in the accompanying prospectus.

                                         S-61

                            DESCRIPTION OF THE NOTES

The following information concerning the 6.375% notes due 2012 offered hereby
supplements and should be read in conjunction with the statements in the
accompanying prospectus under the caption 'Description of Debt Securities We May
Offer'. References in parentheses are to certain sections of the indenture to be
dated as of April 1, 2002 between us and Bankers Trust Company, as Trustee (the
'indenture'), which is more fully described in the accompanying prospectus.

The notes will be issued as one of a series of unsecured debt securities under
the indenture. The notes will constitute senior securities and will be issued as
our unsecured obligations and will rank equally with all of our existing and
future unsecured senior debt and senior to all of our existing and future
subordinated debt, except for indebtedness mandatorily preferred by law. The
notes will be issued in an aggregate principal amount of US$500,000,000, subject
to possible reopening as described below.

The notes will bear interest from April 3, 2002, payable semi-annually in
arrears on each April 1 and October 1, commencing October 1, 2002 at the rate
set forth on the cover page of this prospectus supplement, to the persons in
whose names the notes are registered at the close of business on the March 15 or
September 15 prior to the payment date.

The notes will be issued in the form of one or more global securities, in
registered form, in denominations of US$1,000 or an integral multiple thereof.
This is described under 'Description of Debt Securities We May Offer-Legal
Ownership' on pages 8 to 10 of the accompanying prospectus.

We may issue from time to time other series of debt securities under the
indenture consisting of notes or other unsecured evidences of indebtedness. We
may also from time to time, without the consent of the holders of the notes,
create and issue further notes having the same terms and conditions as the notes
described in this prospectus supplement so that such further issue is
consolidated and forms a single series with the series of outstanding notes. Any
such notes of the same series will be issued in accordance with the Internal
Revenue Service regulations relating to the reopening of issuances of debt
instruments in order that such notes will be treated for U.S. federal income tax
purposes as being part of the same series as the notes offered by this
prospectus supplement. The indenture does not limit the amount of debt
securities or any other debt which may be incurred by us or our subsidiaries. In
addition, the provisions of the indenture do not afford holders of the notes
protection in the event of a highly leveraged transaction, reorganisation,
restructuring, acquisition, merger or similar transaction involving us that
could adversely affect holders of the notes.

The indenture only limits our ability to create or permit to exist a mortgage,
charge, pledge, lien or security interest (a 'Lien') on any of our present or
future property or assets to secure indebtedness in very limited circumstances.
We are generally free to grant Liens to secure indebtedness except for
indebtedness evidenced by notes, bonds, debentures or other similar debt
instruments which are, or are capable of being, listed, quoted, ordinarily dealt
in or traded on any recognised stock exchange, over the counter or securities
market (generally without equally and ratably securing the notes). We may grant
a Lien in connection with such indebtedness if we also grant a Lien that we
believe is comparable with respect to the notes. Furthermore, the indenture does
not limit the ability of our subsidiaries to create or permit to exist Liens in
respect of any type of indebtedness. 

We have applied to the UK Listing Authority for the notes to be admitted to the
Official List of the UK Listing Authority and to the London Stock Exchange for
the notes to be admitted to trading on the London Stock Exchange's market for
listed securities. Admission to the Official List of the UK Listing Authority
together with admission to trading on the London Stock Exchange's market for
listed securities constitute official listing on a stock exchange.

Payment

As indicated above, the notes will be issued only in the form of global
securities. We will pay interest, principal and any other money due on the notes
represented by global securities to the holder of the global securities. This is
described under 'Description of Debt Securities We May Offer-Additional
Mechanics- Payment and Paying Agents' on page 11 of the accompanying prospectus.

                                        S-62


Payment of Additional Amounts

The section 'Description of Debt Securities We May Offer-Payment of Additional
Amounts' in the accompanying prospectus is replaced in its entirety by the
following:

We will pay all amounts that we are required to pay on the notes without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments or other governmental charges imposed or levied by or on
behalf of Australia or any political subdivision or taxing authority of
Australia. This obligation will not apply, however, if those taxes, duties,
assessments or other governmental charges are required by Australia or any such
subdivision or taxing authority to be withheld or deducted. If that were to
occur, we will pay the additional amounts of, or in respect of, the principal
of, and any premium and interest on, the affected notes, called 'additional
amounts', that are necessary so that the net amounts paid to the holders of the
notes, after deduction or withholding, will equal the amounts of principal and
any premium and interest that we would have had to pay on those notes if the
deduction or withholding had not been required. (Section 1008)

Our obligation to pay any additional amounts will not apply, however, to:

• any withholding, deduction, tax, duty, assessment or other governmental charge
that would not have been imposed but for the fact that the holder or beneficial
owner of the affected notes:

• was a resident, domiciliary or national of, or engaged in business or
maintained a permanent establishment or was physically present in, Australia or
otherwise had some connection with Australia other than only owning that note or
an interest in that note, or receiving payments under that note;

• presented that note for payment in Australia, unless he or she was required to
present the note for payment in Australia and it could not have been presented
for payment anywhere else; or

• presented that note more than 30 days after the date payment became due on that
note or was provided for, whichever is later, except to the extent that the
holder of the affected note would have been entitled to the additional amounts
on presenting the note for payment at the close of that 30 day period;

• any estate, inheritance, gift, sale, transfer, personal property or similar
tax, assessment or other governmental charge or any withholding or deduction on
account of such taxes;

• any tax, assessment or other governmental charge which is payable otherwise
than by withholding or deduction from payments of, or in respect of, principal
of, or any premium or interest on, the affected note;

• any withholding, deduction, tax, assessment or other governmental charge that
is imposed or withheld because the holder or the beneficial owner of the
affected note did not comply with our request:

• to provide information concerning his or her nationality, residence or
identity; or

• to make a declaration or other similar claim or satisfy any requirement for
information or reporting, including, in the case of a holder who is a resident
of Australia for tax purposes or a non-resident holding notes through a
permanent establishment in Australia, the quotation of an Australian Tax File
Number or Australian Business Number;

• which, in the case of each of the two preceding bullet points, is required or
imposed by a statute, treaty, regulation or administrative practice of Australia
or any political subdivision or taxing authority of or in Australia as a
condition to an exemption from all or part of the withholding, deduction, tax,
assessment or other governmental charge;

• any withholding, deduction, tax, assessment or other governmental charge that
is imposed or withheld because the holder of the affected note or any person
having directly or indirectly an interest or right in respect of the affected
note is our 'associate' as defined in section 128F(9) of the Australian Income
Tax Assessment Act 1936;                                        

                                     S-63


• any withholding or deduction that is imposed or withheld as a consequence of a
determination having been made under Part IVA of the Australian Income Tax
Assessment Act 1936, or any modification thereof or provision substituted
therefore, by the Commissioner of Taxation of the Commonwealth of Australia that
withholding tax is payable in respect of a payment;

• any withholding, deduction, tax, duty, assessment or other governmental charge
which is imposed or withheld on a payment to an individual and is required to be
made pursuant to any European Union Directive on the taxation of savings
implementing the conclusions of the ECOFIN Council meeting of the 26th-27th
November 2000, or any law implementing or complying with, or introduced in order
to conform to, such Directive;

• any withholding, deduction, tax, duty, assessment or other governmental charge
which is imposed or withheld on a payment with respect to a note presented for
payment by or on behalf of a noteholder who would be able to avoid such
withholding or deduction by presenting the relevant note to another paying agent
in a Member State of the European Union; or

• any combination of the foregoing bullet points.

The term 'associate' is widely defined for the purposes of section 128F(9) of
the Australian Income Tax Assessment Act 1936. It would include:

• a person who controls the casting of at least 50% of the votes in us;

• any trust under which we, or any of our subsidiaries, can benefit; and

• any entity which we control or in which we have at least 50% of the shares,
even where that entity acts as trustee.

Additional amounts will also not be paid on any payment of the principal of, or
any premium or interest on, any note to any holder of that note who is a
fiduciary or partnership or other than the sole beneficial owner of such payment
to the extent that payment would, under the laws of Australia or any political
subdivision or taxing authority of Australia, be treated as being derived or
received for tax purposes by a beneficiary or settlor of that fiduciary or a
member of that partnership or a beneficial owner who would not have been
entitled to those additional amounts had it been the actual holder of the
affected note.

Whenever we refer in this prospectus supplement, in any context, to the payment
of the principal of, or any premium or interest on, any note or the net proceeds
received on the sale or exchange of any note, we mean to include the payment of
additional amounts to the extent that, in that context, additional amounts are,
were or would be payable. (Section 1008)

Optional Redemption

We may, at our option, redeem some or all of the notes at any time, on at least
30days, but not more than 90 days, prior notice mailed to the registered address
of each holder of our notes. The redemption prices will be equal to the greater
of:

• 100% of the principal amount of the notes to be redeemed; and

                                        S-64

• the sum of the present values of the Remaining Scheduled Payments (as defined
below) discounted to the redemption date, on a semiannual basis (assuming a 360-
day year consisting of twelve 30-day months), at a rate equal to the sum of the
Treasury Rate (as defined below) and 20 basis points.

In the case of each bullet point above, accrued interest will be payable to the
redemption date.

The definitions of terms used in the calculation of the redemption prices are
set forth below.

• 'Treasury Rate' means, with respect to any redemption date, the rate per annum
equal to the semiannual equivalent yield to maturity or interpolation (on a day
count basis) computed as of the third business day immediately preceding that
redemption date, of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such redemption date.

• 'Comparable Treasury Issue' means the United States Treasury security or
securities selected by an Independent Investment Banker as having an actual or
interpolated maturity comparable to the remaining term of the notes to be
redeemed that would be utilised, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of a comparable maturity to the remaining term of such notes.

• 'Comparable Treasury Price' means, with respect to any redemption date:

• the average of the Reference Treasury Dealer Quotations for that redemption
date after excluding the highest and lowest of such Reference Treasury Dealer
Quotations; or

• if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such quotations.

• 'Independent Investment Banker' means one of the Reference Treasury Dealers,
appointed by the Trustee after first consulting with us.

• 'Reference Treasury Dealer Quotations' means, with respect to each Reference
Treasury Dealer and any redemption date, the average of the bid and asked prices
for the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 3:30p.m., New York City time, on the third business day preceding such
redemption date.

• 'Reference Treasury Dealer' means each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Salomon Smith Barney Inc., Credit Suisse First Boston
Corporation, J.P. Morgan Securities Inc. or their affiliates, plus one other to
be selected by the Trustee, in each case, that are primary U.S. Government
securities dealers, and their respective successors. If any of the foregoing or
their affiliates shall cease to be a primary U.S. Government securities dealer
in New York City, we will substitute another primary U.S. Government securities
dealer in New York City.

• 'Remaining Scheduled Payments' means, with respect to each note to be
redeemed, the remaining scheduled payments of principal of and interest on the
note that would be due after the related redemption date but for the redemption.
If that redemption date is not an interest payment date with respect to a note,
the amount of the next succeeding scheduled interest payment on the note will be
reduced by the amount of interest accrued on the note to the redemption date.

The redemption price will be calculated by the Independent Investment Banker and
we, the Trustee and any paying agent for the notes will be entitled to rely on
that calculation.

On and after the redemption date, interest will cease to accrue on the notes or
any portion of the notes called for redemption, unless we default in the payment
of the redemption price and accrued interest. On or before the redemption date,
we will deposit with a paying agent or the Trustee money sufficient to pay the
redemption price of and accrued interest on the notes to be redeemed on that
date.

In the case of any partial redemption, selection of the notes for redemption
will be made by the Trustee in compliance with the requirements of the London
Stock Exchange, by lot or by such other method as the Trustee in its sole
discretion deems to be fair and appropriate.

                                        S-65  

Since a nominee of The Depository Trust Company (the 'Depositary') will be the
registered holder of the notes held as global securities, notice by the
Depositary to participating institutions and by these participants to street
name holders of indirect interests in the notes will be made according to
arrangements among them and may be subject to statutory or regulatory
requirements.

Redemption of Notes for Taxation Reasons

The section 'Description of Debt Securities We May Offer-Redemption of Debt
Securities for Taxation Reasons' in the accompanying prospectus is replaced in
its entirety by the following:

If:

• there is a change in or any amendment to the laws or regulations of Australia
or our successor's jurisdiction of organisation (if other than Australia), or of
any political subdivision or taxing authority of or in Australia or our
successor's jurisdiction of organisation (if other than Australia), that affects
taxation; or

• there is a change in any application or interpretation of those laws or
regulations either generally or in relation to any particular debt securities,

which change becomes effective on or after the date we originally issued the
affected notes (and, in the case of a successor jurisdiction, after the date of
succession) and causes us to become obligated to pay any additional amounts, as
described under 'Payment of Additional Amounts' in this prospectus supplement,
then we can, at our option, redeem all, but not less than all, of the notes on
which additional amounts would become payable. (Section 1108)

Before we can redeem the affected notes, we must:

• give the holders of those notes at least 30days written notice and not more
than 90 days written notice of our intention to redeem those notes; and

• deliver to the Trustee under the indenture a legal opinion of our counsel
confirming that the conditions that must be satisfied for redemption have
occurred.

The redemption price for redeeming the affected notes will be equal to 100% of
the principal amount of those notes plus accrued and unpaid interest to the date
of redemption.

Mergers and Similar Events

The section 'Description of Debt Securities We May Offer-Special Situations-
Mergers and Similar Events' in the accompanying prospectus is replaced in its
entirety by the following:

We are generally permitted to consolidate or merge with another company or firm,
including by way of a scheme of arrangement. We are also permitted to sell or
lease our assets substantially as an entirety to another firm, or to buy
substantially all of the assets of another company or firm. However, we may not
take any of these actions unless all the following conditions are met:

• Where we merge out of existence or sell or lease our assets substantially as
an entirety, the other company or firm must agree to be legally responsible for
the notes. This must include the obligation to pay the additional amounts
described earlier in this prospectus supplement under 'Payment of Additional
Amounts'. If the other company or firm is organised under the laws of a country
other than Australia or the United States, it must also agree to indemnify you
and the other Holders of the notes against any government charge or cost
resulting from the transaction. Furthermore, if the other company or firm is
organised under the laws of a country other than Australia, it must further
agree that, with respect to its assumption of the obligation to pay additional
amounts described earlier, it will substitute the name of the country of its
organisation for Australia in each place that Australia appears in Section 1008
of the indenture relating to additional amounts, as described earlier in this
prospectus supplement under 'Payment of Additional Amounts';

                                        S-66 

• We deliver to the Trustee an officer's certificate and an opinion of counsel
each stating that the consolidation, merger, sale, lease or purchase complies
with the indenture; and

• The merger, sale or lease of our assets substantially as an entirety or other
transaction must not cause a default on the notes, and we must not already be in
default under the notes, unless the merger or other transaction would cure the
default. A default for this purpose would also include any event that would be
an event of default if the requirements for giving us a notice of default or our
default having to exist for a specific period of time were disregarded.

It is possible that the merger, sale or lease of our assets substantially as an
entirety or other transaction would cause some of our property to become subject
to a mortgage or other legal mechanism giving lenders preferential rights in
that property over other lenders or over our general creditors if we fail to pay
them back. We have promised in the indenture to limit these preferential rights
on our property, called 'Liens', in connection with certain of our
'indebtedness', as previously discussed on on page S-62 of this prospectus
supplement under 'Description of the Notes', on page S-66 of this prospectus
supplement under 'Description of the Notes-Mergers and Similar Events' and on
pages 13 and 14 of the accompanying prospectus under 'Description of Debt
Securities We May Offer-Restrictions on Liens in the Indenture'. If a merger or
other transaction would create any Liens on our property in connection with such
'indebtedness', we must comply with that restrictive covenant in the indenture.
If the Lien would not be permitted under the indenture, we would be required to
grant an equivalent ranking Lien on the same property to the registered holders
of the notes. (Section 801)

It is possible that the merger or other transaction may cause the holders of the
notes to be treated for U.S. federal income tax purposes as though they
exchanged the notes for new securities. This could result in the recognition of
taxable gain or loss for U.S. federal income tax purposes and possible other
adverse tax consequences.

Defeasance

The discussion of full defeasance and covenant defeasance contained under
'Description of Debt Securities We May Offer-Defeasance' in the accompanying
prospectus will apply to the notes described in this prospectus supplement.

Clearing Systems

As described earlier, the notes will be represented by one or more global
securities registered in the name of the Depositary. The provisions set forth
under 'Clearance and Settlement-The Clearing Systems-DTC' in the accompanying
prospectus will be applicable to the global securities. Accordingly, beneficial
interests in the global securities will be shown on, and transfers thereof will
be effected only through, records maintained by the Depositary and its
participants (including Clearstream and Euroclear). Except as described under
'Clearance and Settlement-Clearance and Settlement Procedures-DTC' in the
accompanying prospectus, owners of beneficial interests in the global securities
will not be entitled to receive notes in definitive (certificated) form and will
not be considered the holders of the notes.

Ownership of beneficial interests in the notes represented by global securities
will be limited to institutions that have accounts with the Depositary or its
nominee ('participants') or persons that may hold interests through
participants. Payments of principal and interest will be made to the
Depositary's nominee as the registered owner of the global securities. Under the
terms of the Indenture, we and the Trustee will treat the persons in whose names
the global securities are registered as the owners of the notes, for the purpose
of receiving payments of principal and any premium and interest and for all other
purposes. Therefore, neither we, the Trustee nor any other agent will have any
direct responsibility or liability for the payment of principal or any premium
or interest to owners of beneficial interests in the global securities.

                                        S-67

The Depositary has advised us and the Trustee that its current practice is to
credit the accounts of the participants with payments of principal or interest
on the date payable in amounts proportionate to their respective holdings in
principal amount of beneficial interests in the global securities as shown in
the records of the Depositary, unless the Depositary has reason to believe that
it will not receive payment on such date. Payments by its participants and
indirect participants to owners of beneficial interests in the global securities
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers in bearer form or
registered in 'street name', and any such payments will accordingly be the
responsibility of such participants or indirect participants.

The Depositary is a limited-purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a 'clearing
corporation' within the meaning of the New York Uniform Commercial Code, and a
'clearing agency' registered pursuant to Section 17A of the U.S. Securities
Exchange Act of 1934. The Depositary accepts securities for deposit from
participants and facilitates the clearance and settlement of transactions in
such securities between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers (including
the underwriters of the notes), banks and trust companies and clearing
corporations and may include certain other organizations ('DTC participants').
Indirect access to the Depositary systems is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.

Clearstream: Clearstream is incorporated under the laws of Luxembourg as a
professional depositary. Clearstream holds securities for Clearstream
participants (as defined below) and facilitates the clearance and settlement of
securities transactions between Clearstream participants through electronic
book-entry changes in accounts of Clearstream participants, thereby eliminating
the need for physical movement of certificates. Clearstream provides to
Clearstream participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream interfaces with domestic
markets in several countries. As a professional depositary, Clearstream is
subject to regulation by the Luxembourg Monetary Institute. Clearstream
participants are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organisations and may include the underwriters of
the notes ('Clearstream participants'). Indirect access to Clearstream is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Clearstream
participant either directly or indirectly.

Distributions with respect to global securities held beneficially through
Clearstream will be credited to cash accounts of Clearstream participants in
accordance with its rules and procedures, to the extent received by Clearstream.

Euroclear: Euroclear was created in 1968 to hold securities for Euroclear
participants (as defined below) and to clear and settle transactions between
Euroclear participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Euroclear provides various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries. All
operations are conducted by the Euroclear Bank, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
Bank, not the cooperative. The cooperative establishes policy for Euroclear on
behalf of Euroclear participants. Euroclear participants include banks
(including central banks), securities brokers and dealers and other professional
intermediaries and may include the underwriters of the notes
('Euroclearparticipants'). Indirect access to Euroclear is also available to
other firms that clear through or maintain a custodial relationship with
Euroclear participant, either directly or indirectly.

                                        S-68

Securities clearance accounts and cash accounts with Euroclear Bank are governed
by the Terms and Conditions Governing Use of Euroclear and the related Operating
Procedures of the Euroclear System, and applicable Belgian law (collectively,
the 'Euroclear Terms and Conditions'). The Euroclear Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payment with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
Euroclear Banks acts under the Euroclear Terms and Conditions only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.

Distributions with respect to global securities held beneficially through
Euroclear will be credited to the cash accounts of Euroclear participants in
accordance with the Euroclear Terms and Conditions, to the extent received by
the Euroclear Bank and by Euroclear.

So long as the Depositary or its nominee is the registered holder of the global
securities, the Depositary, or such nominee, as the case may be, will be
considered the sole owner or holder of the global securities. Payments of
principal and premium, if any, interest and additional amounts, if any, in
respect of the global securities will be made to the Depositary, or such
nominee, as the case may be, as registered holder thereof. None of us, any
paying agent, any underwriter of the notes and any affiliate of any of the above
or any person by whom any of the above is controlled (as such term is defined in
the U.S. Securities Act of 1933) will have any responsibility or liability for
any records relating to or payments made on account of beneficial ownership
interests in the global securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. 

Interests on the global securities (other than interest on redemption) will be
paid to the holders shown on the Register for the notes and payable at the close
of business on the related Record Date.

Because the Depositary can only act on behalf of participants, who in turn act
on behalf of indirect participants, the ability of a person having an interest
in the global securities to pledge such interest to persons or entities which do
not participate in the relevant clearing system, or otherwise take actions in
respect of such interest, may be affected by the lack of a physical certificate
in respect of such interest.

The holdings of book-entry interests in the global securities through the
Depositary will be reflected in its book-entry accounts.

Global Clearance and Settlement Procedures

Secondary market trading between DTC participants will occur in the ordinary way
in accordance with the Depositary's rules. Secondary market trading between
Clearstream participants and/or Euroclear participants will occur in the
ordinary way in accordance with the applicable rules and operating procedures of
Clearstream and Euroclear.

Cross-market transfers between persons holding directly or indirectly through
DTC participants, on the one hand, and directly or indirectly through
Clearstream or Euroclear participants, on the other, will be effected in the
Depositary in accordance with its rules on behalf of the relevant international
clearing system by its U.S. depositary; however, such cross-market transactions
will require delivery of instructions to the relevant international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
international clearing system will, if a transaction meets its settlement
requirements, deliver instructions to its U.S. depositary to take action to
effect final settlement on its behalf by delivering to, or receiving notes from,
the Depositary, and making or receiving payment in accordance with normal
procedures for settlement with the Depositary. Clearstream participants and
Euroclear participants may not deliver instructions directly to their respective
U.S. depositaries.

                                         S-69

Because of time-zone differences, credits of notes received in Clearstream or
Euroclear as a result of a transaction with a DTC participant will be made
during subsequent securities settlement processing and dated the business day
following the the Depositary's settlement date. Such credits or any transactions
in such notes settled during such processing will be reported to the relevant
Clearstream or Euroclear participants on such business day. Cash received in
Clearstream or Euroclear as a result of sales of notes by or through a
Clearstream participant or a Euroclear participant to a DTC participant will be
received with value on the the Depositary's settlement date but will be
available in the relevant Clearstream or Euroclear cash account only as of the
business day following settlement in the Depositary.

Although the Depositary, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among their respective
participants, they are under no obligation to perform or continue to perform
such procedures and such procedures may be changed or discontinued at any time.

Governing Law

The indenture and the notes will be governed by, and construed in accordance
with, the laws of the State of New York. However, our authorization and
execution of the indenture and the notes will be governed by, and construed in
accordance with, the laws of the Commonwealth of Australia. (Sections 112 and
203)

Prescription

There is no express term in the indenture as to any time limit on the validity
of claims of holders to payments of interest and the repayment of principal, but
any such claims will be subject to any statutory limitation period prescribed
under the laws of the State of New York.


                                       S-70

                                     TAXATION

Australian Taxation

The following replaces 'Taxation-Australian Taxation' in the accompanying
prospectus in its entirety.

The following statements with respect to taxation are only general summaries and
are based on advice we have received. You should consult your own tax advisors
concerning the consequences, in your particular circumstances, under United
States federal and Australian tax laws, and the laws of any other taxing
jurisdiction, of the ownership of notes.

The following is a summary of the principal Australian tax consequences
generally applicable to a holder of notes who is resident of the United States
and not a resident of Australia for tax purposes. It is not exhaustive, and in
particular, does not deal with the position of certain classes of holders of
notes. Prospective holders of notes who are in any doubt as to their tax
position should consult their professional advisers. 

An exemption from Australian interest withholding tax is available in respect of
debt securities under section 128F of the Income Tax Assessment Act 1936 of
Australia (the 'Australian Tax Act') if the following conditions are met:

(a) we are a resident of Australia when we issue the notes and when interest
(which is defined in section 128A(1AB) of the Australian Tax Act to include,
among other things, amounts in the nature of, or in substitution for, interest)
is paid; and

(b) the notes are issued in a manner which satisfies the public offer test.
There are five principal methods of satisfying the public offer test the purpose
of which is to ensure that lenders in overseas capital markets are aware that we
are offering notes for issue. In summary, the five methods are:

(i) offers to 10 or more unrelated financiers or securities dealers;

(ii) offers to 100 or more investors;

(iii) offers of listed debt securities;

(iv) offers via publicly available information sources; and

(v) offers to underwriters, managers or dealers who offer to sell the debt
securities within 30 days by one of the preceding methods.

In addition, the issue of a note in global form and the offering of interests in
the note by one of these methods should satisfy the public offer test.

(c) we do not know, or have reasonable grounds to suspect, at the time of issue,
that the notes were being, or would later be, acquired, directly or indirectly,
by an associate of us (other than in the capacity of an underwriter, manager or
dealer in relation to the placement of the notes); and

(d) at the time of the payment of interest, we do not know, or have reasonable
grounds to suspect, that the payee is an associate of us.

We expect to issue notes that will be characterised as debt (and not equity) for
the purposes of Australian taxation legislation and in a manner which will
satisfy the requirements of section 128F of the Australian Tax Act.

It should be noted that, by a press release dated August 29, 2001, the
Australian Federal Government announced, but has not yet legislated, that the
exemption from interest withholding tax would not be lost if our 'on-shore'
associates acquired securities, such as the notes. In addition, the class of
'off-shore' associates that could acquire notes will be expanded to include
clearing houses, paying agents, fund managers and custodians.

                                       S-71

If, for any reason, the interest we pay is not exempt from interest withholding
tax, the treaty ('Treaty') titled 'Convention for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income'
between the United States and Australia may apply. This treaty provides that
interest which has its source in Australia, and to which a United States
resident, as defined in the treaty and who is entitled to the benefit of the
treaty, is beneficially entitled, may be taxed in Australia, but that any tax
charged shall not exceed 10% of the gross amount of interest. However, this
provision will not apply where the indebtedness giving rise to the interest
entitlement is effectively connected with:

• the United States resident beneficial owner's permanent establishment, at or
through which it carries on business in Australia; or

• the United States resident beneficial owner's fixed base, situated in
Australia, from which it performs independent personal services

For completeness, it should also be noted that on September 27, 2001, Australia
entered into a protocol ('Protocol') to the Treaty with the US. In addition to
the above, the Protocol provides that any interest derived under the notes by
certain bodies (including certain financial institutions resident in the US and
government bodies in the US) will not be subject to interest withholding tax in
Australia (even if the exemption under section 128F is not satisfied). However,
the new taxation of interest provisions in the Protocol will only apply, at the
earliest, from July 1, 2003.

As set out in more detail in 'Description of the Notes-Payment of Additional
Amounts' in this prospectus supplement and unless expressly provided to the
contrary, if we should at any time be compelled by law to deduct or withhold an
amount in respect of any present or future taxes, duties, assessments or other
governmental charges imposed or levied by or on by behalf of Australia or any
political subdivision or taxing authority of Australia, we will, subject to
certain exceptions as described in more detail 'Description of the Notes-Payment
of Additional Amounts' in this prospectus supplement, pay such additional
amounts as may be necessary in order to ensure that the net amounts received by
you after such deduction or withholding shall equal the respective amounts which
would have been receivable had no such deduction or withholding been required.
In the event that we are compelled by a change in law in relation to any notes
to deduct or withhold an amount in respect of any such taxes, duties,
assessments or other governmental charges, we will have the option to redeem
such notes as set out in more detail in 'Description of the Notes-Redemption of
Debt Securities for Taxation Reasons' in this prospectus supplement.

We have also been advised by Mallesons Stephen Jaques, our Australian counsel,
that under Australian laws as presently in effect:

(a) assuming the requirements of section 128F of the Australian Tax Act are
satisfied with respect to the notes, payment of principal and interest to a
holder, who is not a resident of Australia for tax purposes and who, during the
taxable year, has not engaged in trade or business at or through a permanent
establishment in Australia, will not be subject to Australian income taxes;

(b) a holder who is not a resident of Australia for tax purposes and who during
the taxable year has not engaged in trade or business at or through a permanent
establishment in Australia, will not be subject to Australian income tax on
gains realized during that year on sale or redemption of the notes, provided
such gains do not have an Australian source. A gain arising on the sale of notes
by a holder who is not a resident of Australia for tax purposes to another
person who is not a resident of Australia for tax purposes where the notes are
sold outside Australia and all negotiations are conducted, and documentation
executed, outside Australia would not be regarded as having an Australian
source;

(c) no notes will be subject to death, estate or succession duties imposed by
Australia, or by any political subdivision or authority therein having power to
tax, if held at the time of death;

(d) no ad valorem stamp, issue, registration or similar taxes are payable in
Australia on the issue of any notes or the transfer of any notes;
 
                                       S-72

(e) assuming the requirements of section 128F of the Australian Tax Act are
satisfied with respect to the notes, the requirements of section 12-140of the
Taxation Administration Act 1953 of Australia relating to the quotation of tax
file numbers do not apply to payments to a holder who is not a resident of
Australia for tax purposes;

(f) the requirements of section 12-190of the Taxation Administration Act 1953 of
Australia, which apply to certain payments made in respect of supplies provided
by the payee, should not apply to payments that we make to holders under the
notes; and

(g) neither the issue of the notes nor the payment of principal and interest in
respect of the notes gives rise to a liability to goods and services tax in
Australia.

United States Taxation

The following replaces 'Taxation-United States Taxation-Backup Withholding and
Information Reporting' in the accompanying prospectus in its entirety.

Backup Witholding and Information Reporting

In general, if you are a noncorporate United States holder, we and other payors
may be required to report to the Internal Revenue Service all payments of
principal, any premium and interest on your notes. In addition, the proceeds of
the sale of your notes before maturity within the United States will be reported
to the Internal Revenue Service. Additionally, backup withholding at a rate of
30% may apply to any payments if you fail to provide an accurate taxpayer
identification number or you are notified by the Internal Revenue Service that
you have failed to report all interest and dividends required to be shown on
your federal income tax returns.

                                      S-73

                                  UNDERWRITERS

Under the terms and subject to the conditions contained in an underwriting
agreement dated the date hereof, the underwriters named below, for whom, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Salomon Smith Barney Inc. are
acting as representatives, have severally agreed to purchase from us, and we
have agreed to sell to the underwriters, severally, the respective principal
amounts of notes set forth opposite their respective names below.

Underwriter                                                     Principal
                                                             Amount of Notes

Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . US$225,000,000

Salomon Smith Barney Inc. . . ... . . . . . . . . . . . . . . . 225,000,000

Credit Suisse First Boston Corporation . . . . . . . . . . . . . 25,000,000

J.P. Morgan Securities Inc. . . . . . . .  . . . . . . . . . . . 25,000,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .  US$500,000,000

The underwriting agreement provides that the obligations of the several
underwriters are subject to the approval of certain legal matters by their
counsel and certain other conditions. The underwriters are committed to take and
pay for all the notes if any are taken.

The underwriters propose to offer the notes directly to the public at the
respective public offering prices set forth on the cover page hereof and to
certain dealers at prices that represent concessions not in excess of .300% of
the principal amount of the notes. The underwriters may allow, and such dealers
may reallow, concessions not in excess of .125% of the principal amount of the
notes, to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.

The expenses of the offering, not including the underwriting discount, are
estimated to be US$412,000, and are payable by us.

We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the U.S. Securities Act of 1933, or to
contribute to payments which the underwriters may be required to make in respect
thereof.

We have applied to the UK Listing Authority for the notes to be admitted to the
Official List of the UK Listing Authority and to the London Stock Exchange for
the notes to be admitted to trading on the London Stock Exchange's market for
listed securities. Admission to the Official List of the UK Listing Authority
together with admission to trading on the London Stock Exchange's market for
listed securities constitute official listing on a stock exchange.

In connection with the offering, the underwriters are permitted to engage in
transactions that stabilise the market price of the notes. Such transactions
consist of bids or purchases to peg, fix or maintain the price of the notes. If
the underwriters create a short position in the notes in connection with the
offering by selling more notes than are on the cover page of this prospectus
supplement, the underwriters may reduce that short position by purchasing notes
in the open market. Purchases of a note to stabilise the price or to reduce a
short position could cause the price of the note to be higher than it might be
in the absence of such purchases. 

Neither we nor any of the underwriters makes any representation or prediction as
to the direction or magnitude of any effect that the transactions described
above may have on the price of the notes. In addition, neither we nor any of the
underwriters makes any representation that the underwriters will engage in these
transactions or that these transactions, once commenced, will not be
discontinued without notice.

                                        S-74


Some of the underwriters and their affiliates have engaged in, and may in the
future engage in, investment banking and other commercial dealings in the
ordinary course of business with us. They have received customary fees and
commissions for these transactions.

It is expected that delivery of the notes will be made against payment on or
about the date specified on the last paragraph of the cover page of this
prospectus supplement, which is the fifth business day following the date of
this prospectus supplement. This settlement cycle is typically referred to as
'T+5'. Purchasers of notes should be aware that trading of the notes on the
first or second day of trading may be affected by T+5 settlement.

Selling Restrictions

United Kingdom

Each underwriter has represented, warranted and agreed that:

(a) No offer to public: it has not offered or sold and will not offer or sell
any notes to persons in the United Kingdom prior to admission of the notes to
listing in accordance with Part VI of the FSMA, except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 or the FSMA;

(b) Financial Promotion: it has only communicated or caused to be communicated,
and will only communicate or cause to be communicated, any invitation or
inducement to engage in investment activity (within the meaning of section 21 of
the FSMA) received by it in connection with the issue or sale of any notes in
circumstances in which section 21(1) of the FSMA does not apply to us; and

(c) General compliance: it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in relation to the
any notes in, from or otherwise involving the United Kingdom.

Commonwealth of Australia

No prospectus or other disclosure document in relation to the notes has been
lodged with, or registered by, the Australian Securities and Investments
Commission. Each underwriter has represented and agreed that, it:

(a) has not made or invited, and will not make or invite, an offer of the notes
for issue or sale in Australia (including an offer or invitation which is
received by a person in Australia); and

(b) has not distributed or published, and will not distribute or publish, this
prospectus supplement, the accompanying prospectus or any other offering
material or advertisement relating to the notes in Australia.

In addition, each underwriter has represented and agreed that, in connection
with the primary distribution of the notes, it will not sell the notes to any
person who is known by such underwriter to be one of our associates for the
purposes of section 128F of the Income Tax Assessment Act 1936 of Australia.

General

This prospectus supplement, the accompanying prospectus and a separate document
containing certain information required by the UK Listing Authority comprise the
Listing Particulars for the notes to be admitted to the Official List of the UK
Listing Authority and to be admitted to trading on the London Stock Exchange's
market for listed securities. Admission to the Official List of the UK Listing
Authority together with admission to trading on the London Stock Exchange's
market for listed securities constitute official listing on a stock exchange.
Except for obtaining the approval of the Listing Particulars by the UK Listing
Authority in accordance with Part VI of the FSMA and other than in the United
States, no action has been or will be taken in any jurisdiction by us or any
underwriter that would, or is intended to, permit a public offering of the
notes, or possession or distribution of these Listing Particulars or any other
offering material, in any country or jurisdiction where action for that purpose
is required. Persons into whose hands these Listing Particulars come are
required by us and the underwriters to comply with all applicable laws and
regulations in each country or jurisdiction in which they purchase, offer, sell
or deliver notes or have in their possession, distribute or publish these
Listing Particulars or any other offering material relating to the notes, in all
cases at their own expense.
  
                                        S-75

                              VALIDITY OF THE NOTES

The validity of the notes will be passed upon for us by our U.S. counsel,
Sullivan & Cromwell, Melbourne, Australia. The validity of certain provisions of
the notes that are governed by or construed in accordance with Australian law
will be passed upon for us by our Australian counsel, Mallesons Stephen Jaques,
Sydney, Australia. The validity of the notes will be passed upon for the
underwriters by Davis Polk & Wardwell, Menlo Park, California.

                            EXPENSES OF THE OFFERING

As indicated on the cover page of this prospectus supplement, we will pay the
underwriters a total of US$2.25 million in discounts to the initial offer price
of the notes. This represents 0.45% of the aggregate principal amount of the
notes offered.

The table below contains an itemised statement of the major categories of the
other expenses expected to be incurred by us in connection with the issuance and
distribution of the notes as described in this prospectus supplement:

                        Category of Expense(1)                     Amount

SEC registration fees . . . . . . . . . . . . . .. . . . . . . . . US$132,000

Trustee's and paying agent's fees and expenses . . . . . . . . . . . . 10,000

Printing and engraving expenses . . . . . . . .. . . . . . . . . . . . 50,000

Legal fees and expenses. . . . . . . . . . . . . . . . . . . . . . .  200,000

Accountant's fees and expenses . . . . . . . . . . . . . . . . . . . . 20,000

Total . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . US$412,000

(1) All amounts estimated, except for SEC registration fees.

                                        S-76




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MSCIIFIDVDITFIF                                            

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