Telstra and Vodafone will take part in a A$385 million public-private funding programme that will see them extend mobile coverage to rural areas and other blackspots by building or upgrading 499 base station sites over three years.

Telstra will contribute the bulk of the funding and roll out 429 towers to Vodafone's 70 under the government's mobile blackspots programme, the Department of Communications announced on Thursday.

The incumbent's share of the investment will come in at A$165 million, while Vodafone will spend A$70 million and the federal government will kick in A$100 million. State governments in New South Wales, Victoria, Queensland, Western Australia and Tasmania will co-fund base stations in their jurisdictions, while various local governments, businesses and community organisations have also agreed to co-funding deals with the telcos, the state said.

"All three operators put forward proposals and base stations from two of them have been chosen for funding," said Paul Fletcher, MP and parliamentary secretary to comms minister Malcolm Turnbull, according to the transcript of a speech made on Thursday.

"Both Telstra and Vodafone have put a lot of effort into this, a lot of creative thinking," he said.

"We are acutely aware of the challenges facing communities living with limited access to a mobile network and that is why Telstra is excited to play an important role in delivering mobile coverage for the first time to a large number of regional communities," said Mike Wright, Telstra's group managing director of networks, in a blog post.

He added that including its own investment and that allocated to it by the various governments, Telstra will have a total of more than A$340 million to spend under the programme.

"This federal funding will allow us to extend our network into more parts of Australia, offering a high-quality and reliable service to customers in regional areas which currently do not have coverage or choice," said Dan Lloyd, director of strategy and corporate affairs at Vodafone Australia.

"We are looking forward to being a part of these communities," Lloyd said. "We will be moving forward to bring these sites into operation as soon as possible."

The 499 locations were chosen based on a set of criteria outlined late last year, including coverage, cost and backing.

New South Wales has the most sites with 144, followed by Western Australia with 130 and Victoria with 110. 68 locations in Queensland were chosen, 31 in Tasmania, 11 in South Australia and 5 in the Northern Territory.

In addition, Telstra's proposal will see it roll out up to 200 4G small cells in various Australian towns. The telco will work with the government to determine the locations of those small cells in the second half of this year.

Telstra's Wright confirmed that plan and added that Telstra has another agreement in place with the Queensland government that will see it install another 50 small cells in that state.

Separately, the government announced the second round of its mobile blackspots programme on Thursday.

In round two the government will invest A$60 million over a two-year period starting on 1 July 2016 to meet unmet demand and provide coverage to more locations.

The competition for funding will begin next year, after members of the public have had a chance to nominate mobile blackspots that could be addressed by the process. The successful round two locations are due to be announced before the end of 2016.