Exhibit #2

Australians who awoke on the wintry morning of Saturday 26 June 1999, rubbed their eyes, swung their feet out of bed, started breakfast and then opened the newspaper were treated to an egregious, perhaps epochal – and therefore completed unnoticed – example of groupthink and the institutional imperative. The country’s Monday-to-Saturday business publication, The Australian Financial Review, in an article entitled “Why Telstra II Is Worth Buying” (26-27 June), informed its readers that “for those investors considering buying shares in the Government’s second sale of Telstra Corp. – the largest public offering in Australian history – the message from the experts is ‘go for it.’ Telstra is worth buying, they say, because the company has a strong financial base, great growth prospects and an experienced management team.” The AFR cited several experts, each with an appealing photo and an upbeat quotation, in order to elaborate this position. Expert #1 stated “… the first tranche presented a better opportunity for investors. We’re still very bullish on Telstra though, as a long-term growth story.” Expert #2 opined “I don’t think it’s spread its full entrepreneurial wings. The blue sky for the company is in non-traditional areas and is as wide as your imagination.” And Expert #3 said “… It’s a great company, a great story, with strong growth potential, but at the end of the day it comes down to what you’re paying for the growth stock.”

Neither the journalists writing for – nor the “experts” cited in – The Weekend Australian expressed any such reservation about price paid vis-à-vis value received. It informed its readers (“Why Telstra’s a Real Humdinger” 26-27 June) “many investors approaching the Telstra II issue will be torn between greed and the fear of paying too much. In a market trading as high as it ever has in prospective PE (price/earnings ratio) terms, it is only human to feel wary about buying a stock that looks even more overpriced … If the price of Telstra II is pitched at yesterday’s closing price of $8.45, investors would be paying a PE of 27.9 times expected earnings for 1999-2000, based on the 30.3 cents a share the consensus of analysts’ forecasts, collated by The Estimates Directory, expects Telstra to earn. Telstra is ‘priced’ at a two-thirds premium to the prospective PE of the All Ordinaries, which stands at about 17 times 1999-2000 earnings.”

But not to worry: The Weekend Australian reassured its readers “the Telstra situation does not look like one to reward caution. Relax. Telstra is worth it.” It justified this stance on the grounds that “not only is it pointless to price Telstra by the PE of the Australian market; it is equally [futile] to use the PEs on which its international peers trade.” By this reasoning, TWA seemed to suggest, Telstra II instalment receipts were a safe investment at any price. According to a telecommunications analyst at a major investment and brokerage institution cited in the article, “there is no multiple to which Telstra can really be compared. If you stack Telstra up against its international peers, the incumbent telcos, Telstra is better positioned than any of them … None of its international peers is number one in each of the three key growth segments [i.e., mobile telephony, the internet and pay TV]. The positioning of Telstra to capture the value of these strongly growing services is exceptionally good.” The analyst added that Telstra was “well exposed” to technological developments that would soon become commercially viable. These were thought to include digital TV, interactive broadband services, satellite networks and the possibility that the copper wire local telephony network could be modified to transmit video data.

The exuberant analyst summarised his opinion: “the things that are in place – mobile, pay TV, internet – will drive earnings, whilst the things in the pipeline will drive the market’s perception of Telstra as a growth stock.” Further, “the growth premium you are being asked to pay for Telstra now does not take into account any of the goodies in the pipeline that are likely to start appearing over the next couple of years. We have a target price of $20 on the stock by 2003, but all that assumes is above average earnings growth and continual expansion in the … price-earnings ratio the market is prepared to pay for Telstra … The risk/reward profile is better than you will get anywhere else … and the likelihood of Telstra outperforming the market over a longer period is very, very good.”

Not only did the crowd – this seemingly unanimously optimistic crowd – consider that Telstra was safe at its lofty multiple of earnings: its safety was apparently unrelated to its ability to generate profits. The Weekend Australian’s reporter concluded that “the beauty of the situation for Telstra is it does not necessarily have to be making money out of these growth opportunities for them to be factored into its share price. The market sees them as all about strategic positioning for the future.”