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Merger Creates Major Force In NZ Communications

Telstra Saturn Media Release

24 February 2000

Telstra Saturn - Merger Creates Major Force In New Zealand Communications Market

Austar United Communications and Telstra Corporation today announced that they had agreed to merge their New Zealand operations, Saturn Communications and Telstra New Zealand to form a 50:50 joint venture.

The new company, Telstra Saturn Limited, will offer voice, data, internet, mobile and Pay TV services to the business and residential markets, combining Telstra's Australian domestic product set with that of Saturn.

Telstra and Austar have further committed to invest more than NZ$1 billion over five years to create a state of the art national broadband network. This will be funded by equity contributions by the joint venture partners and debt raised by the new entity.

The infrastructure investment will include a submarine backbone linking Auckland, Wellington and Christchurch, CBD fibre access in Auckland, Wellington and Christchurch and business access, possibly wireless in Hamilton, Dunedin and Tauranga.

Residential broadband fibre access will also be provided in Auckland and Christchurch to supplement Saturn's existing Wellington network.

Lindsay Yelland, Chairman of the Board of the new company and Telstra Group Managing Director for Business Solutions, said the new network would expand competition with leading edge technology that provided an opportunity for additional products and services.

"For example, our submarine cable will have three times the capacity of the existing north/south island link, to supply the band width which will be critical for the growth of the information economy.

"Our infrastructure will by pass Telecom's network. We believe that this is the only effective way to introduce competition.

"We were attracted by Saturn's sophisticated cable network - capable of delivering voice video and data - and are delighted at the opportunity to work with Austar and Saturn to expand the network and develop new services."

John Porter, Chief Executive of Austar United Communications said he believes the logic behind the deal is compelling.
"Telstra is a great company with a growing position in the New Zealand corporate telecommunications market. Saturn has made dramatic inroads into residential communications and entertainment in Wellington. Together we can achieve synergies which will allow us to reduce costs and improve quality of service for New Zealand consumers.

"In the Wellington residential area Saturn has already achieved significant local telephony penetration. We would expect to see that success repeated in other areas of New Zealand."

The companies also announced that Jack Matthews (formerly CEO of Saturn) will be the Chief Executive of Telstra Saturn Limited.

"I am excited at the opportunity to build a great New Zealand enterprise," said Matthews. "Both companies bring a tremendous range of skill and expertise to the new entity. Those skill sets are complementary, so that existing staff will be retained and form the basis of an organisation which will grow significantly over the next few years.

"The New Zealand market has great potential. Clearly, there are still barriers to fair competition to be overcome. However, the Government has indicated that it will address the worst of these and on that basis we have the confidence to make this investment."

"We are now well placed to bring the broadband revolution to New Zealand," Mr Yelland commented. "Ours will be the only network capable of delivering the sophisticated communications services which will be critical to New Zealand's successful move to the information economy."

"We will build a valuable business because consumers of all types will be keen to experience the range and quality of services we will offer at truly competitive prices," Mr Porter concluded.

The companies expect to sign a final merger agreement in March.

Since it began operation in 1996, Telstra New Zealand has targeted the corporate and large business market. Telstra staff numbers have grown to 230 and it has offices in Auckland, Wellington and Christchurch. Late last year, Telstra acquired Netlink, an ISP that provides a wide range of internet based products and services to the corporate and business market.

Saturn has established a hybrid fibre coaxial network past 100,000 homes in Wellington. It has achieved over 25% penetration in local telephony, 20% penetration for pay television and 10% penetration for Internet service. Saturn also offers a broadband service to small and medium enterprise business customers and will shortly launch similar service for residential customers.

About Telstra Corporation

Telstra is Australia's leading telecommunications and information services company with revenue of $18.2 billion for the year ended 30 June 1999. Telstra is one of Australia's largest corporations and is one of the best-known brands in the country. The company offers a full range of services and competes in all telecommunications markets throughout Australia. Its main activities are to provide:

Telephone lines to homes and businesses
Local and long-distance telephone calls in Australia and international calls to and from Australia
Mobile telecommunications services
A comprehensive range of data, Internet and on-line services
Wholesale services to other carriers and carriage service providers
Telephone directories (White Pages( and Yellow Pages(); and
Pay television services through an affiliate

Telstra's Networks

Telstra's fixed telephony network extends across Australia and services virtually all Australian homes and most Australian businesses. It has optical fibre on all major traffic routes and has a fully digital switching capability that allows it to develop and deploy a full range of modern products and services. As well as the basic telephony network, the Company has a variety of other delivery platforms over which it provides services, such as:

An integrated services digital network;
Switched, data, transaction and digital data networks;
A hybrid fibre co-axial cable broadband network that runs past 2.5 million homes;
Internet protocol networks; and
International submarine cables and access to international satellite infrastructure.

Telstra is the largest mobile telecommunications provider in Australia, with a digital GSM network covering over 94% of the population and international roaming to more than 65 countries. Telstra has recently launched a second digital mobile network based on CDMA technology. Telstra expects the digital CDMA mobile network to provide wide-ranging coverage and high-quality service.

About Austar United Communications

Through its three operating subsidiaries, Austar United (Australian Stock Exchange “AUN”) is one of the largest and fastest growing broadband communications companies serving the Australian and New Zealand markets. AUSTAR Entertainment is the second largest pay TV operator in Australia, and the largest providing digital DTH services, with over 370,000 subscribers. XYZ Entertainment is a significant program provider in the Australian market and owns and/or distributes Nickelodeon, Discovery, Channel [V], Arena and The Lifestyle Channel to over 900,000 subscribers. And Saturn Communications operates the first and largest broadband telecommunications company in New Zealand, offering a full mix of cable television, telephony and Internet services. Austar is one of the first companies in Australasia to offer broadband internet access and will be the first to launch interactive television. Austar United is 75% owned by UnitedGlobalCom.

About UnitedGlobalCom

United (NASDAQ “UCOMA”) is the largest global broadband communications provider of video, voice and data services with operations in more than 20 countries throughout the world. United’s networks reach 15.4 million homes and businesses and serve 8.4 million voice and video customers. In addition, the company’s recently launched cable telephony and high speed Internet access businesses serve over 300,000 telephony access lines and 100,000 high-speed data accounts. United’s significant operating subsidiaries include UPC (51% owned), the largest pan-European broadband communications company, Austar United Communications (75% owned) a rapidly growing satellite, cable television and telecommunications provider in Australasia, and VTR Hipercable (100% owned), the largest cable television and competitive telephony provider in Chile.

Jack Matthews

Jack B Matthews has served as Chief Executive Office of Saturn since January 1995. Mr Matthews is responsible for the technical, operating and marketing aspects of the business. Mr Matthews has served in various general management capacities with several US multiple system operators, including Cox Cable Communications and Continental Cablevision. From August 1993 until joining Saturn, Mr Matthews was the vice president - Sales & Marketing of Arrowsmith Technologies, a cable technology company. From 1990 to 1993, Mr Matthews was the president of COMM/ONE, an entrepreneurial business that markets sophisticated video and voice processing systems. Mr Matthews has over 14 years of US milt-channel television industry experience.]

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