-----------------------------------------------
                               Dated 30 March 2000



                               WARRANTY AGREEMENT



                           Telstra Corporation Limited
                                     ("TCL")
                      Austar United Communications Limited
                                    ("AUCL")
























                            Mallesons Stephen Jaques
                                   Solicitors

                                    Level 60
                             Governor Phillip Tower
                                 1 Farrer Place
                                 Sydney NSW 2000
                           Telephone (61 2) 9296 2000
                              Fax (61 2) 9296 3999
                                  DX 113 Sydney
                                    Ref: NBC



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Contents         Warranty Agreement
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                 1 Interpretation                                              1


                 2 Condition Precedent                                         4


                 3 Warranties                                                  4


                 4 Redundancies                                                6


                 5 ESOP, Incentive Plan, etc                                   6


                 6 Adjustment for tax liability                                8


                 7 Indentures                                                 14


                 8 Enforcing an indemnity                                     14


                 9 Costs                                                      14


                 10 Confidentiality                                           14


                 11 Notices                                                   15


                 12 Miscellaneous                                             16


                 13 Governing law, jurisdiction and service of process        17


                 Schedule 1 Subsidiaries                                      19


                 Appendix Warranties                                          20




<PAGE>

                               WARRANTY AGREEMENT

Date:               30 March 2000

Parties:            TELSTRA  CORPORATION  LIMITED  (ACN  051  775  556)  of  231
                    Elizabeth Street, Sydney NSW ("TCL")

                    AUSTAR  UNITED  COMMUNICATIONS  LIMITED (ACN 087 695 707) of
                    Level 29, 259 George Street, Sydney NSW ("AUCL")

Recitals:
               A.   THPL is wholly owned subsidiary of TCL.

               B.   TNZ is a wholly is owned subsidiary of THPL.

               C.   The Company is a wholly owned subsidiary of AUCL.

               D.   The  Company has offered to acquire all of the shares in TNZ
                    from  THPL in  consideration  for the issue of shares in the
                    Company to THPL.

               E.   THPL has accepted the Company's offer in accordance with the
                    terms of the Merger Agreement.

               F.   In  consideration  of AUCL agreeing to procure the Company's
                    entry  into the  Merger  Agreement,  TCL has  agreed to give
                    warranties  and  indemnities  to AUCL as are set out in this
                    agreement.

               G.   In  consideration  of TCL  agreeing to procure  THPL's entry
                    into  the  Merger   Agreement,   AUCL  has  agreed  to  give
                    warranties  and  indemnities  to  TCL as  set  out  in  this
                    agreement

Operative provisions:
1    Interpretation
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     1.1  The following  words have these meanings in this agreement  unless the
          contrary intention appears.

          Accounting  Standards means generally accepted  accounting practice as
          defined by Section 3 of the Financial Reporting Act 1993 (NZ).

          AUCL Services  Agreement means the agreement by that name between AUCL
          and the Company to be executed before Completion.

          Business  Integration  Plan means that as defined in the  Shareholders
          Agreement.

          Commencement Date means the day on which Completion occurs.

          Company  means  Saturn  Communications  Limited  of 75  The  Esplanade
          Petone, New Zealand.

          Company   Group  means  the  Company  and  the  Company   Subsidiaries
          immediately before Completion.

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                                                                               2

          Company  Subsidiaries  means  the  companies  described  in  Part A of
          Schedule 1.

          Consultancy Agreement means the agreement between TCL and the Company,
          to be executed before Completion.

          ESOP means the AUCL Executive Share Option Plan.

          Establishment Agreements means:

          (a)  the Merger Agreement;

          (b)  the Offer to Acquire Shares;

          (c)  the Consultancy Agreement;

          (d)  the Jack Matthews Deed;

          (e)  the TCL Services Agreement;

          (f)  the AUCL Services Agreement;

          (g)  the Shareholders Agreements;

          (h)  the TCL/Company IP Licence Agreement; and

          (i)  the TCL/TNZ IP Licence Agreement.

          Group means the Company Group or the TNZ Group.

          Incentive  Plan  means  the  Company's  Incentive   Compensation  Plan
          effective as of 1 January 1998.

          Initial  Business  Plan  means  that  set  out  in  Schedule  1 of the
          Shareholders Agreement.

          Jack  Matthews  Deed means the deed by that name between Jack Matthews
          and the Company, to be executed before Completion.

          Merger Agreement means the agreement by that name between THPL and the
          Company, dated on or about the date of this agreement.

          Offer to Acquire  Shares means the  agreement by that name between the
          Company and THPL, dated on or about the date of this agreement.

          Saturn Participants means such employees of the Company as participate
          in any of the ESOP, a Share Plan or the Incentive Plan.

          Share Plans means the AUCL Employee  Share Plan - Offer A and the AUCL
          Employee Share Plan - Offer B.

          Tax means taxes, levies, imposts,  deductions,  charges,  withholdings
          and  duties  (excluding  stamp  duties),  together  with  any  related
          interest,   penalties,  fines  and  other  statutory  charges  whether
          accruing before or after Completion.

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                                                                               3

          TCL/Company  IP Licence  Agreement  means the  agreement  by that name
          between TCL and the Company, to be executed before Completion.

          TCL Services  Agreement  means the  agreement by that name between TCL
          and the Company, to be executed before Completion.

          TCL/TNZ IP Licence  Agreement means the agreement by that name between
          TCL and TNZ, to be executed before Completion.

          Telstra Saturn Incentive  Compensation Plan means that plan as defined
          in the Shareholders Agreement.

          THPL  means  Telstra  Holdings  Pty  Limited  (ACN 057 808 938) of 231
          Elizabeth Street, Sydney NSW.

          TNZ means  Telstra New Zealand  Limited of Level 9, 191 Queen  Street,
          Auckland.

          TNZ  Group  means  TNZ  and the TNZ  Subsidiaries  immediately  before
          Completion.

          TNZ Subsidiaries  means the companies  described in Part B of Schedule
          1.

          Warranties  means the  representations  and  warranties set out in the
          Appendix.

     1.2  Terms used but not defined in this agreement  which are defined in the
          Merger  Agreement  shall  bear  the  same  meaning  as in  the  Merger
          Agreement.

     1.3  In this agreement unless the contrary intention appears:

          (a)  a  reference  to a clause,  schedule,  annexure  or appendix is a
               reference  to a clause of or  schedule,  annexure  or appendix to
               this  agreement  and  references  to this  agreement  include any
               recital, schedule, annexure or appendix;

          (b)  a reference to this agreement or another instrument  includes any
               variation or replacement of either of them;

          (c)  a reference to a statute,  ordinance,  code or other law includes
               regulations and other  instruments  under it and  consolidations,
               amendments, re-enactments or replacements of any of them;

          (d)  the singular includes the plural and vice versa;

          (e)  the  word  person   includes  a  firm,  a  body   corporate,   an
               unincorporated association or an authority;

          (f)  a  reference  to a person  includes a reference  to the  person's
               executors,  administrators,  successors,  substitutes (including,
               but not limited to, persons taking by novation) and assigns;

<PAGE>
                                                                               4

          (g)  an agreement, representation or warranty in favour of two or more
               persons is for the benefit of them jointly and severally;

          (h)  an  agreement,  representation  or warranty on the part of two or
               more persons binds them jointly and severally;

          (i)  if a period of time is  specified  and dates  from a given day or
               the day of an act or event,  it is to be calculated  exclusive of
               that day;

          (j)  a reference to a day is to be  interpreted  as the period of time
               commencing at midnight and ending 24 hours later;

          (k)  all currency references are to the New Zealand dollar;

          (l)  all  references to subsidiary or related body  corporate bear the
               meaning as set out in Division 6 of Part 1.2 of the  Corporations
               Law;

          (m)  all  references  to  securities  bear the  meaning  as set out in
               section 92(3) of the Corporations Law;

          (n)  a  reference  to a business  day means any day when the banks are
               open for business in Sydney, other than a Saturday or Sunday;

          (o)  control  and  controlled  are  defined  by the  test  set  out in
               paragraph 9 of the Australian Accounting Standard AASB 1024; and

          (p)  all  currency  references  are  to  the  lawful  currency  of New
               Zealand.

2    Condition Precedent
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     2.1  This agreement shall become  effective upon each of the  Establishment
          Agreements  being executed in full (except for clause 5.1, which takes
          effect upon the date of this agreement).

3    Warranties
--------------------------------------------------------------------------------

     3.1  TCL   (warrantor)   represents,   warrants  and   undertakes  to  AUCL
          (warrantee)  that each of the  Warranties  (except  those stated to be
          given only by AUCL) is true and correct with respect to each member of
          the TNZ Group and their businesses (together,  subsidiary) on the date
          of this agreement and will be true and correct on the Completion Date,
          as if made on each of those dates.

     3.2  AUCL   (warrantor)   represents,   warrants  and   undertakes  to  TCL
          (warrantee)  that each of the  Warranties  (except  those stated to be
          given only by TCL) is true and correct  with respect to each member of
          the Company Group and their businesses  (together,  subsidiary) on the
          date of this  agreement and will be true and correct on the Completion
          Date as if made on each of those dates.

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                                                                               5

     3.3  Each of the  Warranties is to be treated as a separate  representation
          and warranty and the  interpretation  of any warranty  made may not be
          restricted by reference to or inference from any other  warranty.

     3.4  Each of the parties acknowledges that:

          (a)  in the case of TCL - THPL, and in the case of AUCL - the Company,
               in  entering  into the  Merger  Agreement  and in  proceeding  to
               Completion  under  the  Merger  Agreement,  does  not rely on any
               representation,  warranty,  condition or other  conduct which may
               have been made by any person, except the Warranties;

          (b)  subject to any law to the  contrary and except as provided in the
               Warranties,  all terms,  conditions,  warranties and  statements,
               whether express, implied, written, oral, collateral, statutory or
               otherwise,  are excluded and the parties (including,  in the case
               of TCL - on behalf  of THPL,  and in the case of AUCL - on behalf
               of the Company)  disclaim  all  liability in relation to these to
               the maximum extent permitted by law; and

          (c)  in the case of TCL - THPL, and in the case of AUCL - the Company,
               has had the opportunity to make and has made reasonable enquiries
               in relation  to all matters  material to it which are not covered
               by the Warranties and satisfied itself in relation to the matters
               arising from those investigations.

     3.5  The Warranties are not  extinguished or affected by any  investigation
          made by or on behalf of any  person  into the  business  of TNZ or the
          Company (as the case may be) or by any other event or matter unless:

          (a)  the warrantee has given a specific written waiver or release;

          (b)  the claim  relates  to a matter  which is fairly  disclosed  in a
               formal  disclosure  letter given by or on behalf of the warrantor
               to the warrantee before the date of this agreement; or

          (c)  the claim relates to a thing done or not done after the execution
               of this  agreement  at the  request or with the  approval  of the
               warrantee.

     3.6  The warrantor  indemnifies the warrantee against all liability or loss
          arising  directly from, and any costs,  charges and expenses  incurred
          directly in connection with, any inaccuracy in or breach of any of the
          Warranties. For the avoidance of doubt, this indemnity does not extend
          to any liability,  loss, cost,  charge or expense which is indirect or
          consequential.

     3.7  Without limiting the generality of this clause 3, and as an additional
          right of a warrantee for breach of a Warranty:

          (a)  if the value of any asset of a member of a Group is less than the
               value it  would be if all of the  Warranties  in  respect  of the
               Group were accurate and not breached,  then the warrantor  agrees
               to pay to the  warrantee the value of that asset at Completion as
               if all of the Warranties were accurate and not breached, less the
               value of that asset at Completion; and

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                                                                               6

          (b)  if there is a  liability  of a member of a Group  which would not
               exist or would be less if all of the  Warranties  with respect to
               that Group were accurate and not breached,  the warrantor  agrees
               to pay to the  warrantee  the  amount  of that  liability  or the
               amount of the increase in that  liability,  as applicable.

     3.8  A  warrantee  may not claim for any  breach of  Warranty  unless  full
          details of the claim have been given to the warrantor within 18 months
          after the Completion Date.

     3.9  No claim  for a breach of  Warranty  can be made for any sum less than
          $500,000.

     3.10 No claim for breach of Warranty can be made until the aggregate  value
          of all claims  (including  any claims  which  could not be made due to
          clause 3.9) exceeds:

          (a)  in the case of claims by AUCL - $10,000,000; and

          (b)  in the case of claims by TCL - $17,500,000.

     3.11 AUCL  may not  claim  for  breach  of the  Warranties  given by TCL an
          aggregate amount in excess of $100,000,000;

     3.12 TCL may not  claim  for  breach  of the  Warranties  given  by AUCL an
          aggregate amount in excess of $175,000,000.

4    Redundancies
--------------------------------------------------------------------------------

     4.1  Without prejudice to AUCL's obligations under clause 5, the Company is
          solely responsible for all redundancy compensation payable as a result
          of the  termination of the employment of such employees of the Company
          Group or the TNZ Group as are made redundant after Completion.

5    ESOP, Incentive Plan, etc
--------------------------------------------------------------------------------

     5.1  AUCL,  TCL and  the  Company  acknowledge  and  agree  that as soon as
          practical  after the date of this agreement the Company shall make the
          following  offer to the  Saturn  Participants  who  participate  under
          either  or both  of the  ESOP  and the  Incentive  Plan  (except  Jack
          Matthews) and AUCL, TCL and the Company must use their best endeavours
          to  encourage  each such  Saturn  Participant  promptly  to accept the
          offer:

          (a)  the  Saturn  Participant's   employment  by  the  Company  ceases
               immediately prior to Completion;

          (b)  on Completion,  the Saturn Participant  accepts employment by the
               Company on substantially the same terms and conditions  including
               the carry forward of all accrued employment entitlements;

<PAGE>
                                                                               7

          (c)  under  clause 7.4 of the ESOP,  all Vested  Options of the Saturn
               Participant  in existence  immediately  prior to  Completion  are
               exercisable  in the three months  following  Completion,  and all
               other Options of the Saturn Participant immediately lapse;

          (d)  under the Incentive Plan the Saturn Participant shall be entitled
               at any time within 90 days after  Completion  to exercise  his or
               her rights under clause 5.2(e) of the Incentive Plan with respect
               to such of their  Incentive  Interests as are vested  immediately
               prior to Completion and all other Incentive Interests immediately
               lapse; and

          (e)  with effect from Completion,  the Saturn Participant participates
               in the Telstra Saturn Incentive Compensation Plan.

     5.2  AUCL must procure that:

          (a)  no Saturn Participants shall be invited to participate in a Share
               Plan in any year commencing on or after 1 July 2000; and

          (b)  with  respect  to the  Saturn  Participants,  the  AUCL  board of
               directors,  with effect from Completion,  remove the restrictions
               on the sale or  transfer  of Shares  set out in clause 7.1 of the
               Share Plans; and

          (c)  no  ESOP  Options  are  granted  to  Saturn   Participants  after
               Completion.

     5.3  AUCL agrees to  indemnify  the Company  against all  liability or loss
          arising  directly from, and any costs,  charges and expenses  incurred
          directly  in  connection  with,  the  ESOP,  the  Share  Plans  or the
          Incentive Plan.

     5.4  AUCL and TCL acknowledge and agree that the issue at Completion of the
          Company  Shares to THPL shall  amount to a change in  control  for the
          purposes of clause 6.4(b) of the Incentive Plan.

     5.5  Without  limiting the  generality  of clause 5.3,  AUCL must within 14
          days of receiving  written  notice from the Company pay to the Company
          by cheque or telegraphic  transfer the amount (if any) required by the
          Company to make any payments which the Company is legally  required to
          pay  under  clause  6.5 of the  Incentive  Plan due to the  change  in
          control  caused by the Company  Shares  being issued to THPL under the
          Merger Agreement.

     5.6  TCL and AUCL must procure that:

          (a)  if each of the offers as described in clause 5.1 is accepted with
               respect to the Incentive Plan prior to Completion - the Incentive
               Plan terminates with effect from Completion; and

          (b)  if paragraph (a) does not apply - with effect from Completion, no
               additional  Incentive  Interests  are granted under the Incentive
               Plan.

<PAGE>
                                                                               8

6    Adjustment for tax liability.
--------------------------------------------------------------------------------

     6.1  In this clause 6 the following words have these meanings:

          Authority  means  any   governmental   authority  or   instrumentality
          responsible for Tax, wherever situated.

          Claim Amount means:

          (a)  the amount the Entity is required  to pay in Tax to an  Authority
               as a result of a Tax Claim; or

          (b)  the amount of any  credit,  rebate,  refund,  relief,  exemption,
               concession,  saving  or  sparing  of Tax lost by the  Entity as a
               result of a Tax Claim; or

          (c)  the amount of Tax that would, if the Entity had taxable income in
               the year of income to which the Tax Claim relates,  be payable by
               that Entity as a result of the loss or  reduction  of any credit,
               rebate,  refund,   relief,   allowance,   deduction,   exemption,
               concession,  saving or sparing of Tax or loss carried forward (to
               the  extent  that  those  losses  have  been  recognised  in  the
               Completion Accounts of the Entity), calculated at the rate of Tax
               applicable  to  companies  in the year in which  the Tax Claim is
               made.

          Where a Tax Claim arises after the  Completion  Date in relation to an
          occurrence  (including an omission)  prior to the Completion  Date and
          the result of the Tax Claim is a reduction of losses  carried  forward
          in the  Entity as at the  Completion  Date (to the  extent  that those
          losses have been recognised in the Completion  Accounts of the Entity)
          where such  losses  were not able to be carried  forward by the Entity
          after  the  Completion  Date as a  result  of the  application  of the
          continuity  provisions  for loss  carry  forward by  companies  in the
          Income Tax Act 1994,  the Claim  Amount in  relation to that Tax Claim
          will be nil.

          Completion Accounts means:

          (a)  with respect to TNZ as the Entity - the audited  balance sheet of
               TNZ and its wholly owned  subsidiaries  reflecting the assets and
               liabilities of TNZ and its wholly owned  subsidiaries as at close
               of business  on the  Completion  Date and the audited  profit and
               loss  account of TNZ and its wholly  owned  subsidiaries  for the
               period  of 1  July  1999  to  the  Completion  Date  prepared  in
               accordance with clause 6.11; and

          (b)  with  respect to the Company as the Entity - the audited  balance
               sheet of the Company and its wholly owned subsidiaries reflecting
               the assets and  liabilities  of the Company and its wholly  owned
               subsidiaries  as at close of business on the Completion  Date and
               the audited profit and loss account of the Company and its wholly
               owned  subsidiaries  for  the  period  of 1  January  2000 to the
               Completion Date prepared in accordance with clause 6.11.

<PAGE>

                                                                               9

          Entity means:

          (a)  TNZ and its wholly owned subsidiaries; or

          (b)  the Company and its wholly owned subsidiaries.

          Last Accounts means:

          (a)  with  respect to TNZ and its  wholly  owned  subsidiaries  as the
               Entity - the audited  balance  sheet and 12 month profit and loss
               account of 30 June 1999; and

          (b)  with respect to the Company and its wholly owned  subsidiaries as
               the Entity - the audited  balance  sheet and 12 month  profit and
               loss account of 31 December 1999.

          Payer means:

          (a)  with respect to TNZ as the Entity - TCL; and

          (b)  with  respect  to the  Company  as the  Entity - AUCL.

          Recipient means:

          (a)  with  respect to TNZ and its  wholly  owned  subsidiaries  as the
               Entity - AUCL; and

          (b)  with respect to the Company and its wholly owned  subsidiaries as
               the Entity - TCL.

          Tax  Claim  means a  notice  of  assessment  (including  a  notice  of
          adjustment  of a loss  claimed  by an  Entity  in a  manner  adversely
          affecting the Entity), demand or other document issued or action taken
          by or on behalf of an Authority,  whether  before or after the date of
          this  agreement,  (but not  later  than the fifth  anniversary  of the
          Completion  Date) as a result of which the  Entity is liable to make a
          payment for Tax or is deprived of any credit,  rebate, refund, relief,
          allowance, deduction, exemption,  concession, saving or sparing of Tax
          or loss carried forward.

          Tax Provision means, at any time, the sum of:

          (a)  the provision for current Tax in the Completion Accounts;

          (b)  the amount  that would have been paid by the Payer  under  clause
               6.2 (multiplied by 2) if clause 6.8 did not apply; and

          (c)  all amounts  already paid or agreed to be paid by the Payer under
               clause 6.2 at that time multiplied by 2.

          wholly owned  subsidiary  means any body corporate  which  immediately
          prior  to  Completion  was a  wholly  owned  subsidiary  of TNZ or the
          Company  (as  the  case  may  be)  as  defined  in  section  9 of  the
          Corporations Law.

     6.2  Subject  to this  clause  6,  the  Payer  agrees  that if a Tax  Claim
          relating to an act or omission of, or occurrence affecting, the Entity

<PAGE>
                                                                              10

          before the close of  business  on the  Completion  Date is received or
          suffered  by the  Entity at any time,  then the Payer  must pay to the
          Recipient any amount equal to 50% of the amount by which the sum of:

          (a)  the Claim Amount for that Tax Claim; and

          (b)  all other  Claim  Amounts for Tax Claims that relate to an act or
               omission of, or occurrence  affecting the Entity before the close
               of business on the Completion Date,

          exceeds the Tax Provision.

     6.3  The  obligations of the Payer under clause 6.2 do not apply in respect
          of a Tax Claim:

          (a)  to the extent  that the Tax Claim  arises from the failure by the
               Recipient  to supply to the Payer on a timely  basis  information
               which is  reasonably  requested by the Payer in relation to a Tax
               Claim including (without limitation) a breach by the Recipient of
               Clause 6.6;

          (b)  to the extent  that the Tax Claim  arises from the failure by the
               Entity after Completion, in a timely manner, to:

               (i)  lodge any return,  notice of proposed  adjustment,  response
                    notice,  statement of  position,  challenge,  other  notice,
                    objection or other document in relation to the Tax Claim;

              (ii)  claim  all  or  any  portion  of  any   relief,   allowance,
                    deduction, credit, rebate or right to repayment;

             (iii)  disclose  or  correctly  describe  in  any  return,  notice,
                    objection  or other  document  relating to the Tax Claim any
                    fact,  matter  or thing to the  extent  that it was or might
                    reasonably  be expected to have been within the knowledge of
                    either the Recipient or the Entity; or

              (iv)  take any other  action  which the Entity is required to take
                    under this clause or any laws relating to Tax; or

          (c)  to the  extent  that the Tax  Claim  results  from a change to or
               introduction of any legislation, regulation, order or rule or any
               ruling, determination, policy or practice previously published or
               followed by any Authority (whether having the force of law or not
               and whether the change or introduction is  retrospective  or not)
               relating to Tax after the execution of this agreement.

     6.4  Subject to clause 6.8,  payments  under clause 6.2 must be made to the
          Recipient as follows:

          (a)  if the  Entity  must make a payment  of Tax in  respect  of a Tax
               Claim to which  clause 6.2 applies - seven days before the latest
               date on which that payment may lawfully be made without incurring
               any penalty, interest or additional tax for late payment; and

<PAGE>
                                                                              11

          (b)  if the Entity is deprived of any credit,  rebate, refund, relief,
               allowance,  deduction,  loss carried  forward - seven days before
               the  latest  date on which  Tax  becomes  payable  by the  Entity
               without  incurring any penalty,  interest or  additional  tax for
               late payment, being Tax which would not have been payable were it
               not for the Tax Claim.

     6.5  If for any reason an amount received by the Recipient under clause 6.2
          or 6.7 is treated as assessable  income of the Recipient under any law
          relating to Tax the Payer agrees to pay to the Recipient an additional
          amount under this clause 6.5 so that, after deducting from that amount
          all Tax  paid or  payable  in  respect  of the  receipt,  the  balance
          remaining is equal to the amount due under the relevant clause.

     6.6  If the  Recipient  or the  Entity  becomes  aware of a Tax  Claim  the
          Recipient  must  give  written  notice  of it to the  Payer  within  a
          reasonable time of becoming so aware.

          The Recipient  must ensure the Payer and their  professional  advisers
          have  reasonable  access to the  personnel  of the  Recipient  and the
          Entity and to any  relevant  premises,  assets and Records  within the
          custody, power, possession or control of those companies to enable the
          Payer  and its  professional  advisers  to  examine  the Tax Claim and
          Records and to take copies or  photographs  of them, at the expense of
          the Payer,  provided the Payer and its  professional  advisers give to
          the Recipient or the Entity such undertakings as to confidentiality as
          the Recipient may reasonably require. However, the parties must at all
          times act  having  regard to the  extent to which  legal  professional
          privilege or any overseas  equivalent or similar  privilege extends to
          any communication or document.

          The  Recipient  must  ensure  that the  Entity  takes any  proper  and
          reasonable  action within any response  period  prescribed by law that
          the Payer requests to avoid, resist, compromise, challenge or defend a
          demand or notice  issued by an  Authority  which gives rise to the Tax
          Claim,  provided the Payer indemnifies the Recipient and the Entity to
          the reasonable  satisfaction of the Recipient against any liability or
          loss which may be suffered or costs,  damages or expenses which may be
          incurred as a result of compliance with their request.

          The action that the Payer may request be taken by the Recipient or the
          Entity in respect of a Tax Claim  includes  the making of  challenges,
          appeals and objections, provided that all other avenues of review have
          been exhausted.

          Any action  required  under this  clause 6.6 must be taken in a timely
          manner.

     6.7  Without  limiting  clause 6.8, if,  following  the making of a payment
          under  clause 6.2 for a Tax Claim,  all or part of the Claim Amount is
          refunded either in cash or by credit to the Entity (including, but not
          limited  to,  any amount or credit  received  following  a  successful
          objection or appeal),  the Recipient must immediately pay to the Payer
          the  lesser of the refund  and the  amount of the  payment  paid under

<PAGE>
                                                                              12

          clause 6.2 and in the case of reinstatement of tax losses,  the lesser
          of the amount of the payment  paid under  clause 6.2 and the  monetary
          value of the tax losses reinstated.

     6.8  To the extent that a Tax Claim only involves a timing  difference,  as
          determined in accordance  with the Accounting  Standards (for example,
          an amount  being  assessable  in the year ending 30 June 1999,  rather
          than in the succeeding year, or an amount being deductible in the year
          ending 30 June 2000 (or over that year and later  years),  rather than
          in a preceding year, then:

          (a)  It is not  necessary  that the Payer  make a gross  payment,  and
               receive a subsequent refund.

          (b)  Instead, the Payer shall only be liable to pay an amount equal to
               any  interest,  penalty,  additional  tax,  charge,  fee or other
               amount  payable to the  relevant  Authority  in  relation  to the
               timing  difference.

          A  certificate  from the  Recipient  as to any  amount  due under this
          clause,  supported  by details as to the  calculation,  shall be prima
          facie evidence as to the amount payable.

     6.9  If the Payer and the  Recipient  cannot agree on any amount to be paid
          under this clause 6 within 21 days of a dispute  arising,  then either
          the Payer or the  Recipient  may refer the  disagreement  to an expert
          with the request  that the expert make a decision on the  disagreement
          as soon as practicable  after receiving any submissions from the Payer
          and the  Recipient.  The expert is to be a person  with over ten years
          experience in Tax agreed by the Payer and the Recipient, or if they do
          not agree on the person to be appointed within seven days of one party
          requesting appointment,  a person with the same expertise appointed by
          the President of the NZ Institute of Chartered Accountants in relation
          to a Tax Claim  and the  President  of the New  Zealand  Institute  of
          Chartered Accountants in relation to any payments due under clause 6.5
          at the request of either the Payer or the  Recipient.  The decision of
          the  expert is to be  conclusive  and  binding  on the  parties in the
          absence of manifest  error.  The Payer and the Recipient agree to each
          pay one half of the expert's costs and expenses in connection with the
          reference.  The  expert  is  appointed  as an  expert  and  not  as an
          arbitrator.  The procedures for determination are to be decided by the
          expert in its absolute discretion.

     6.10 If an  amalgamation  of the  Company  and TNZ in  accordance  with the
          Companies  Act 1993 (NZ) occurs with the Company  being the  surviving
          entity,  then this  clause 6 is to have effect and is to be applied as
          if the amalgamation did not occur.

     6.11 The  parties   agree  to  cause  the  Company,   promptly   after  the
          Commencement  Date, to prepare the  Completion  Accounts in accordance
          with the Accounting Standards and have those accounts audited (with an
          unqualified  audit  report)  by  the  auditors  of  the  Company.  The
          Completion Accounts must:

          (a)  disclose  a true  and  fair  view of the  state  of the  affairs,
               financial  position and assets and  liabilities of each Entity as

<PAGE>
                                                                              13

               at the  Completion  Date and the income,  expenses and results of
               operations  of TNZ  and its  wholly  owned  subsidiaries  for the
               period  from 1 July 1999 to that date and of the  Company and its
               wholly owned  subsidiaries  for the period from 1 January 2000 to
               that date;

          (b)  include in the balance sheet all such reserves and provisions for
               Tax as are  materially  necessary  to cover all Tax  liabilities,
               whether or not assessed,  of each Entity and its  subsidiaries up
               to the Completion Date; and

          (c)  not include in the balance sheet  provision for auditors fees for
               auditing the Completion Accounts; and

          (d)  be prepared:

               (i)  in  accordance  with the  requirements  of the Companies Act
                    (NZ) (1993) and any other applicable laws;

              (ii)  in accordance with the Accounting Standards;

             (iii)  in the  manner  described  in the  notes  to  them  and  the
                    accompanying  auditor's opinion;

              (iv)  on a  consistent  basis  with  the  Accounts  for the  prior
                    financial period;

               (v)  without  revaluing upwards any assets in the period which is
                    the subject of the Accounts; and

              (vi)  recording  each asset at its  reasonably  estimated  current
                    market value.

          The Completion  Accounts must  immediately be delivered by the Company
          to the parties.

     6.12 If either party  disagrees with the Completion  Accounts it may within
          21 days after receiving the Completion Accounts refer the disagreement
          to an expert with the  request  that the expert make a decision on the
          disagreement  as soon as practicable  after  receiving any submissions
          from the parties.  Such  submissions must be made within 21 days after
          appointment of the expert.  The expert is to be a person with over ten
          years  experience in accounting  agreed by the parties,  or if they do
          not agree on the person to be appointed within seven days of one party
          requesting appointment,  a person with the same expertise appointed by
          the  President of the NZ Institute  of  Chartered  Accountants  at the
          request  of either  the  party.  The  decision  of the expert is to be
          conclusive  and  binding  on the  parties in the  absence of  manifest
          error.  The parties  agree to each pay one half of the expert's  costs
          and expenses in connection with the reference. The expert is appointed
          as  an  expert  and  not  as  an   arbitrator.   The   procedures  for
          determination  are  to be  decided  by  the  expert  in  its  absolute
          discretion.

<PAGE>

                                                                              14

7    Indentures
--------------------------------------------------------------------------------

     7.1  AUCL  agrees  to  indemnify  the  Company,  TCL and THPL  against  all
          liability or loss arising  from,  and any costs,  charges and expenses
          incurred directly in connection with any of the Indentures  materially
          adversely  affecting at any time any act or omission of the Company or
          causing  the  Company  to delay in acting  resulting  in a  materially
          adverse effect for the Company.

8    Enforcing an indemnity
--------------------------------------------------------------------------------

     8.1  If a claim,  suit or action  (suit) is made by a third party and which
          if  satisfied  would  result in a claim under one or more  indemnities
          under  this  agreement  and  the  indemnified  party  intends  in such
          circumstances to make such a claim under the indemnity:

          (a)  the  indemnified  party must within 14 days of becoming  aware of
               the  suit  give  notice  and  full  details  of the  suit  to the
               indemnifying party; and

          (b)  at the expense  and  direction  of the  indemnifying  party,  the
               indemnified   party  must  take  such  action   (including  legal
               proceedings)  as the  indemnifying  party may  require  to avoid,
               dispute,   defend,   appeal  or  compromise   the  suit  and  any
               adjudication of it.

     8.2  To the extent the indemnified  party is not a party to this agreement,
          TCL and AUCL shall procure its compliance with clause 8.1(b).

     8.3  Without  prejudice to clause 6.5, if for any reason an amount received
          by an indemnified  party under any of the provisions of this agreement
          is treated as assessable income of the indemnified party under any law
          relating to Tax, the indemnifying  party agrees to pay the indemnified
          party an  additional  amount  under  this  clause  8.3 so that,  after
          deducting  from that  amount all Tax paid or payable in respect of the
          receipt,  the balance  remaining  is equal to the amount due under the
          relevant provision of this agreement.

9    Costs
--------------------------------------------------------------------------------

     9.1  The parties agree to bear their own legal and other costs and expenses
          in connection with, the preparation,  execution and completion of this
          agreement and of other related documentation.

10   Confidentiality
--------------------------------------------------------------------------------

     10.1 The terms of this agreement are confidential and must not be disclosed
          by a party to any third person except:

          (a)  employees,  directors,  advisers  or  auditors  of a party to the
               extent required in conducting their duties;

          (b)  if disclosure is required by law or stock exchange  listing rule;
               or

<PAGE>

                                                                              15

          (c)  if disclosure is required in  connection  with legal  proceedings
               relating to this agreement.

11   Notices
--------------------------------------------------------------------------------

     11.1 A notice, approval, consent, or other communication in connection with
          this agreement:

          (a)  must be in writing;

          (b)  must be marked for the attention of the person set out below; and

          (c)  must be left at the address of the addressee or sent by facsimile
               or email  to the  facsimile  number  or  email  address  which is
               specified  in this clause or if the  addressee  notifies  another
               address,  facsimile number or email address then to that address,
               facsimile number or email address.

               THPL, TCL or the TCL Shareholder Group
               Address:         Telstra Corporation Limited
                                231 Elizabeth Street
                                SYDNEY  NSW  2000
               Attention:       Group Managing Director, Telstra Business
                                Solutions
               Fax:             (61 2) 9396 9530

               Copy:            Counsel, Telstra Business Solutions
                                231 Elizabeth Street
                                SYDNEY  NSW  2000
               Fax:             (61 2) 9261 4762
               Email:           david.waldie@team.telstra.com


               AUCL, Saturn NZ or the UGC Shareholder Group
               Address:         Austar United Communications Limited
                                Level 29
                                259 George Street
                                SYDNEY   NSW   2000
               Attention:       Corporate Counsel
               Facsimile:        (61 2) 9394 9850
               Email:           awilde@austar.com.au


     11.2 A notice,  approval,  consent or other communication takes effect from
          the time it is received unless a later time is specified in it.

     11.3 A facsimile  is taken to be received  on entry in a  transmission  log
          kept by the machine from which the facsimile was sent which  indicates
          that the facsimile  was sent in its entirety to a facsimile  number of
          the recipient.

<PAGE>

                                                                              16

12   Miscellaneous
--------------------------------------------------------------------------------

Assignment
    12.1  A party may not assign its rights or obligations  under this agreement
          except  with the prior  written  consent of the other  parties to this
          agreement.

Costs
    12.2  Each party  agrees to bear its own legal and other costs and  expenses
          in connection with the preparation and execution of this agreement and
          the Establishment Agreements and of other related documentation.

Exercise of rights
    12.3  A party may exercise a right,  power or remedy at its discretion,  and
          separately or  concurrently  with another  right,  power or remedy.  A
          single or partial exercise of a right, power or remedy by a party does
          not prevent a further exercise of that or of any other right, power or
          remedy. Failure by a party to exercise or delay in exercising a right,
          power or remedy does not prevent its exercise.

Waiver and variation
    12.4  A provision of or a right created under this agreement may not be:

          (a)  waived except in writing signed by the party granting the waiver;
               or

          (b)  varied except in writing signed by the parties.

Approvals and consents
    12.5  A party may give  conditionally  or  unconditionally  or withhold  its
          approval or consent in its absolute  discretion  unless this agreement
          expressly provides otherwise.

Remedies cumulative
    12.6  The  rights,  powers  and  remedies  provided  in this  agreement  are
          cumulative  with and not  exclusive of the rights,  powers or remedies
          provided by law independently of this agreement.

Survival of warranties and indemnities
    12.7  Each  warranty  and  indemnity  in  this  agreement  is  a  continuing
          obligation, separate and independent from the other obligations of the
          parties and survives termination of this agreement.

Enforcement of warranties and indemnities
    12.8  It is not  necessary  for a party to  incur  expense  or make  payment
          before  enforcing a right of warranty or  indemnity  conferred by this
          agreement.

Further assurances
    12.9  Each  party  agrees,  at its own  expense,  on the  request of another
          party,  to do everything  reasonably  necessary to give effect to this
          agreement and the transactions  contemplated by it, including, but not
          limited to, the  execution  of  documents,  and to use all  reasonable
          endeavours to cause relevant third parties to do likewise.

<PAGE>
                                                                              17

Entire Agreement
    12.10 This agreement  constitutes  the entire  agreement of the parties with
          reference  to  its  subject   matter  and  any  previous   agreements,
          understandings,  negotiations,  representations  or warranties on that
          subject matter cease to have any effect.

No partnership

    12.11 Subject  to  any  provision  of  this  agreement  specifically  to the
          contrary, nothing contained or implied in this agreement constitutes a
          party the partner,  agent or legal  representative of another party or
          of the Company for any purpose or creates any  partnership,  agency or
          trust,  and no party has any  authority to bind  another  party or the
          Company in any way.

13  Governing law, jurisdiction and service of process
--------------------------------------------------------------------------------

    13.1  This agreement and the transactions contemplated by this agreement are
          governed by the law in force in New South Wales.

    13.2  Each  party  irrevocably  and  unconditionally  submits  and agrees to
          submit to the  non-exclusive  jurisdiction  of the courts of New South
          Wales,  courts exercising Federal  jurisdiction in New South Wales and
          courts of appeal from them for determining any dispute concerning this
          agreement or the  transactions  contemplated by this  agreement.  Each
          party waives any right they have to object to an action being  brought
          in those  courts  including,  but not  limited to,  claiming  that the
          action has been brought in an inconvenient  forum or that those courts
          do not have  jurisdiction.

     13.3 Without  preventing  any other mode of  service,  any  document  in an
          action  (including,  but not  limited to, any writ of summons or other
          originating  process or any third or other party notice) may be served
          on any  party by  being  delivered  to or left  for that  party at its
          address  for  service  of notices  under  clause  11.

     EXECUTED as an agreement


<PAGE>
                                                                              18
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Execution page
--------------------------------------------------------------------------------


<S>                                                           <C>
SIGNED by                                          )
as authorised representative for TELSTRA           )
CORPORATION LIMITED (ACN 051 775 556) in the       )
presence of:                                       )
                                                   )
/s/ David Waldie                                   )
 ................................................   )
Signature of witness                               )
                                                   )
David Waldie                                       )
 ................................................   )
Name of witness (block letters)                    )
                                                   )          /s/ Lindsay Yelland
1/138 Hastings PDE                                 )          ...............................................
 ................................................   )          By executing this agreement the signatory
Address of witness                                 )          warrants that the signatory is duly authorised
                                                   )          to execute this agreement on behalf of TELSTRA
Lawyer                                             )          CORPORATION LIMITED.
 ................................................   )
Occupation of witness                              )


SIGNED by                                          )
as authorised representative for AUSTAR UNITED     )
COMMUNICATIONS LIMITED (ACN 087 695 707) in the    )
presence of:                                       )
                                                   )
/s/ Sean Michael Wynne                             )
 ................................................   )
Signature of witness                               )
                                                   )
Sean Michael Wynne                                 )
 ................................................   )
Name of witness (block letters)                    )          /s/ John C. Porter
                                                   )          ...............................................
40 Falkirk Ave., Seatown, Wellington               )          By executing this agreement the signatory
 ................................................   )          warrants that the signatory is duly authorised
Address of witness                                 )          to execute this agreement on behalf of AUSTAR
                                                   )          UNITED COMMUNICATIONS LIMITED.
Tel Co Manager                                     )
 ................................................   )
Occupation of witness                              )
</TABLE>



<PAGE>
                                                                              19
<TABLE>
<CAPTION>

Schedule 1                        Subsidiaries
--------------------------------------------------------------------------------------------
<S>                      <C>                       <C>                     <C>

PART A - COMPANY SUBSIDIARIES

--------------------------------------------------------------------------------------------

Name of company          Registered office         Members of the          Beneficial owners
                                                      company              of shares
--------------------------------------------------------------------------------------------
Kiwi Cable Company       75 The Esplanade,           Company                  Company
    Limited              Petone, New Zealand



PART B - TNZ SUBSIDIARIES

--------------------------------------------------------------------------------------------

Name of company          Registered office         Members of the         Beneficial owners
                                                      company             of shares
--------------------------------------------------------------------------------------------

NetLink Limited          Telstra Business               TNZ                     TNZ
                         Centre, Level 9, 191
                         Queen Street, Auckland
</TABLE>





<PAGE>


                                                                              20
--------------------------------------------------------------------------------

Appendix                          Warranties
--------------------------------------------------------------------------------

1.   Authority

1.1  Given only by AUCL. AUCL, the Company and Saturn NZ are authorised to enter
     into and perform such of the following agreements to which they are party:

     (a)  this agreement; and

     (b)  the Establishment Agreements.

1.2  Given only by TCL.  THPL and TCL are  authorised  to enter into and perform
     such of the following agreements to which they are party:

     (a)  this agreement; and

     (b)  the Establishment Agreements.

2.   Financial statements

2.1  Given only by AUCL.

     The:

     (a)  audited  financial  statements  of the  Company  for  the  year  to 31
          December 1999; and

     (b)  unaudited financial statements of the Company for the two months to 29
          February 2000,

     have been prepared in accordance  with the Accounting  Standards and fairly
     present in all material respects the financial  position of the Company for
     those periods,  subject, in the case of the unaudited statements, to normal
     year end adjustments not exceeding $5,000,000.

2.2  Given only by TCL.

     The

     (a)  audited financial statements of TNZ for the year to 30 June 1999; and

     (b)  unaudited  financial  statements  of TNZ for the  eight  months  to 29
          February 2000,

     have been prepared in accordance  with the Accounting  Standards and fairly
     present in all material  respects the  financial  position of TNZ for those
     periods,  subject, in the case of the unaudited statements,  to normal year
     end adjustments not exceeding $5,000,000.

2.3  Each of the monthly management accounting reports of the subsidiary for the
     two years prior to closing  fairly  present in all  material  respects  the
     financial  position of the subsidiary for each of those months,  subject to
     normal year end adjustments.

2.4  Since  the  date  of the  unaudited  financial  statements  referred  to in
     paragraph  2.1 or 2.2 (as the  case  may  be),  there  has  been no  event,
     occurrence or development materially adverse to the subsidiary.

<PAGE>

                                                                              21

3.   Litigation

3.1  There is no material litigation (actual,  threatened or pending) including,
     without limitation,  employment disputes, by or against the subsidiary, and
     there are no facts,  events or  circumstances  which  will give rise to any
     material litigation.

3.2  There are no  unsatisfied  judgements or orders against or in favour of the
     subsidiary.

4.   No default

4.1  The subsidiary is not in violation in any material respect of any law, rule
     or  regulation  to which it is subject  and there have been no  allegations
     against the subsidiary of any such violation.

5.   No fees

5.1  The warrantor and the  subsidiary  will not pay any fees or  commissions to
     any person as a result of execution  or closing of the Merger  Agreement or
     the Shareholders Agreement.

6.   Permits and licences

6.1  The subsidiary has all licences, permits, approvals and easements necessary
     for it to conduct its  business and is not in material  breach  thereof and
     the  warrantor  is not  aware  of  any  matter  that  might  prejudice  the
     continuance or renewal thereof.

6.2  Paragraph 6.1 does not apply to any licence,  permit,  approval or easement
     referred to in paragraph 7.

7.   Environment

7.1  In this paragraph 7:

     "Environment"  means the  environment or  surroundings  including  (without
     limitation) air (including,  without  limitation,  that within buildings or
     natural or  man-made  structures,  whether  above or below  ground),  water
     (including,  without  limitation,  territorial,  coastal and inland waters,
     natural water, drains and sewers) and land (including,  without limitation,
     sea bed or river bed under any water as described  above,  surface land and
     sub-surface land);

     "Environmental  Permits"  means any and all  permits,  consents,  licences,
     approvals,  registrations,  certificates and authorisations  required under
     any and all Environmental Requirements;

     "Environmental  Requirements"  means any law  (including  the common  law),
     statute,  regulation,  notice,  consent,  agreement,  plan,  bond or  other
     requirement having legal effect, relating to the following:

     (a)  protection of the Environment;

     (b)  health and/or safety of people;

     (c)  the use of land or any body of water; and

     (d)  the discharge or release into the Environment of any Substance;



<PAGE>

                                                                              22

     "Substance" includes (without limitation) any solid, liquid, gas, noise, or
     electro-magnetic or other radiation.

7.2  The subsidiary:

     (a)  has  acted  in  accordance  with  best  practice  in all  matters  and
          practices affecting or which might affect the Environment;

     (b)  has obtained  and complied  with all  Environmental  Permits  required
          under any  Environmental  Requirement  for  carrying  on its  business
          (including,  in the case of the Company, the planned network extension
          for the Christchurch  local loop) and is not in breach of any terms or
          conditions  relating  to  such  Environmental  Permits.  So far as the
          warrantor  is  aware,   there  are  no  likely  changes  in  any  such
          Environmental Permits (including amendment,  renewal or cancellation),
          or in any applicable  law, that would require any material  additional
          expense to ensure compliance;

     (c)  has not received any  notification or indication  (formal or informal)
          that  further  Environmental  Permits  may be  required,  or that  any
          existing Environmental Permit may be withdrawn,  restricted,  amended,
          not renewed, not renewed in full, or otherwise affected (relating,  in
          each case, to its business);

     (d)  has  not  caused,   permitted  or   contributed   to  any   pollution,
          contamination, release, discharge, or omission whatsoever, or done any
          other thing, which has damaged or threatened the Environment, or which
          has given or could give rise to any action under, or violation of, any
          Environmental Requirement;

     (e)  has  not  received  any  complaints  or  inquiries   from   employees,
          neighbours or any other person or body about any matter concerning the
          Environment and relating to its business;

     (f)  is not aware of any circumstances that may lead to, or be included in,
          any investigation,  inquiry, order, decree, judgment,  notice or other
          communication   nor  to  the  withdrawal,   limitation,   restriction,
          amendment,  non-renewal or  non-renewal  in full of any  Environmental
          Permit (including, in each case, to its business);

     (g)  has not,  and will not  pending  Completion,  done or omitted to do or
          suffered to be done any act or thing by which any Environmental Permit
          relating to its business could be revoked or withdrawn.

7.3  To the  best of the  warrantor's  knowledge,  there  have  never  been  any
     proceedings  pending  or  threatened  against  the  subsidiary  based on or
     related to any Environmental Permit or Environmental Requirement.

8.   Shareholder and investments

8.1  Given only by AUCL:

     (a)  the Company is a wholly  owned  subsidiary  of AUCL and the Company is
          under no obligation to issue any shares to any other person;

     (b)  the only issued shares of the Company are voting shares; and

     (c)  the  Company  has no  shares  in any body  corporate  (except  for the
          Company  Subsidiaries)  and is not party to any  partnership  or joint
          venture.

<PAGE>
                                                                              23


8.2  Given only by TCL:

     (a)  TNZ is a wholly owned subsidiary of TCL and TNZ is under no obligation
          to issue any shares to any other person;

     (b)  the only issued shares of TNZ are voting shares; and

     (c)  TNZ  has  no  shares  in  any  body  corporate  (except  for  the  TNZ
          Subsidiaries) and is not party to any partnership or joint venture.

9    Assets

9.1  The subsidiary is the legal and  beneficial  owner of all of its assets and
     they are not subject to any encumbrances.

9.2  The  computer  systems,  billing  systems,  network  facilities,  plant and
     equipment  owned or used by the  subsidiary  are sufficient to enable it to
     effectively  conduct its business and are all in good working order, taking
     account of normal wear and tear.

10.  Third party obligations

10.1 The  subsidiary  has given no  guarantees of the  obligations  of any other
     person.

10.2 The subsidiary has given no powers of attorney which remain in force.

11.  Year 2000

11.1 The  subsidiary  has completed a  comprehensive  Y2K (including 29 February
     2000) readiness program which failed to disclose any lack of Y2K (including
     29 February  2000)  readiness in any  hardware or software  material to the
     business of the  subsidiary  (whether or not that  hardware or software was
     owned or operated by the subsidiary).

12.  Material agreements

12.1 The  warrantor  has  disclosed to the  warrantee  all terms of all material
     agreements to which the subsidiary is party.

12.2 Each such  agreement is valid and  enforceable  by the  subsidiary and with
     respect to those agreements:

     (a)  no party is in material breach;

     (b)  no breach by any party is alleged;

     (c)  there is no material dispute between any parties;

     (d)  there is no suspension of supply;

     (e)  entry into and performance of the Merger Agreement and the Shareholder
          Agreement by the  warrantor  and the  subsidiary  (as the case may be)
          will not:

          (i)  be a breach of the agreement;

<PAGE>
                                                                              24


         (ii)  require any counterparty consent; or

        (iii)  give  any   counterparty  a  right  to  terminate  or  amend  the
               agreement.

12.3 There are no offers by the  subsidiary  to enter into  material  agreements
     which are capable of acceptance by a counterparty.

12.4 Given only by AUCL. The terms and conditions  (other than price) upon which
     TCNZ and the Company interconnect their networks are materially the same as
     those set out in the written agreement between them dated 29 June 1997.

12.5 Given only by TCL. The terms and  conditions  (other than price) upon which
     TCNZ and TNZ  interconnect  their networks are materially the same as those
     set out in the written agreement between them dated 11 November 1997.

13.  Taxes (direct and indirect)

13.1 All tax returns filed by the subsidiary were filed on time and are true and
     complete in all material respects.

13.2 There are no unresolved disputes with any tax authority.

13.3 The subsidiary has paid all applicable taxes (including  without limitation
     penalties and interest and employee income tax deductions) on time.

14.  Books and records

14.1 The books and records of the  subsidiary  fairly  represent  the assets and
     liabilities of the subsidiary.

15.  Employees

15.1 The terms upon which all employees of the subsidiary are engaged (including
     without limitation  remuneration and superannuation and rights of dismissal
     and redundancy) have been fully disclosed to the warrantee in writing.

15.2 Given only by AUCL. The terms upon which all employees and directors of the
     Company participate in any share option plans, share plans and incentive or
     bonus plans have been fully disclosed to TCL in writing.

15.3 The subsidiary has made or provided for all payments due to or with respect
     to employees  (including without limitation for wages,  bonuses,  leave and
     superannuation)  or former employees  (including without limitation for any
     redundancy or termination allowances).

15.4 Given only by AUCL. AUCL has fulfilled in full each of its obligations owed
     under  the ESOP and the Share  Plans  with  respect  to all  employees  and
     directors  of the  Company  who  were  at or  before  the  Completion  Date
     participating under the ESOP or a Share Plan.

15.5 Given  only  by  AUCL.  The  Company  has  fulfilled  in  full  each of its
     obligations owed under the Incentive Plan with respect to all employees and
     directors  of the  Company  who  were  at or  before  the  Completion  Date
     participating under the Incentive Plan.

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                                                                              25

16.  Disclosure

16.1 The  warrantor  has  disclosed  to the  warrantee  all  material  facts  of
     relevance  to a prudent  person in  determining  whether  to enter into the
     Merger Agreement.

16.2 All  information  given by the  warrantor to the warrantee in the course of
     due  diligence or  negotiations  leading to the Merger  Agreement was true,
     complete and correct in all material respects.

17.  Indenture  and  Company  Bank  Facility

     Given  only by AUCL.  The  entry by  members  of the UGC  Group  into  this
     agreement and the Establishment  Agreements and the conduct of the business
     of the Company in the manner required by the Initial Business Plan will not
     for   the   duration   of  the   Initial   Business   Plan   place   United
     Australia/Pacific, Inc., UGC or AUCL in breach of any Indenture

18.  No dividends

     Since the date of the unaudited financial  statements of the subsidiary for
     the 8 months to 29 February 2000, no dividends of the subsidiary  have been
     declared or paid.