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"Telstra is currently examining the detail of the reforms and will provide an update to the market as appropriate," the company said in a statement.
Communications Minister Stephen Conroy announced the reforms on Tuesday, saying they will address the telco's high level of integration with the aim of promoting greater competition and consumer benefits.
The legislation allows Telstra to structurally separate on a voluntary basis, but if it chooses not to do so the the government will be able to impose functional separation.
A functional separation would require Telstra to conduct its network operations and wholesale functions at arms length from the rest of its business.
Telstra would then be required to provide equivalent price and non-price terms to its retail business and other wholesale customers.
The telco has long been against the structural separation of its businesses.
Under new chief executive David Thodey the company has taken a more cooperative approach to its dealings with the government than in previous years.
However, Mr Thodey has maintained shareholder value is his first priority.
Telstra was one of the most highly integrated telecommunications companies in the world across the fixed-line copper, cable and mobile platforms, Senator Conroy said.
"The government believes it is possible to achieve a win-win outcome in the interests of Telstra, its shareholders and, more broadly, all Australians," Senator Conroy said.
The government will strengthen consumer safeguards including the Universal Service Obligation, Customer Service Guarantee and the Priority Assistance arrangements to ensure consumers are protected and service standards are maintained at a high level.
"These fundamental reforms address the long-standing inadequacies of the existing telecommunications regulatory regime," he said.
"They will drive lower prices, better quality and more innovative services."
The government will introduce its legislation to parliament later on Tuesday.
The draft laws will require Telstra to lose its cable network and divest its interests in the pay television arm, Foxtel.
Telstra will be prevented from acquiring additional spectrum for advanced mobile services.
"Unless it structurally separates, divests its ... cable network and divests its interests in Foxtel," Senator Conroy said.
Telstra shares were down 13 cents, or four per cent, to A$31.20 (US$26.89) in early trading on the local stock exchange.
(AAP) rw
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