Telstra is set for its biggest shake-up since privatisation under Federal Government plans that would pave the way for a break-up of the telco and introduce new hard-line consumer safeguards.

Communications Minister Senator Stephen Conroy this morning announced the company would need to structurally separate voluntarily - and, if it did not do so, the Government would force a split under a new regulatory regime.

The changes are part of an attempt by the Government to pressure Telstra to be a part of the $43 billion national broadband network, but no promise of involvement has been extracted from Telstra as part of negotiations.

In early trade, Telstra shares were down as much as 14 cents, or 4.3 per cent, to $3.11.