The Australian government has announced that 499 mobile towers will be built or upgraded by Telstra and Vodafone in the first AU$185 million funding round for the mobile blackspots program.

Prime Minister Tony Abbott, Communications Minister Malcolm Turnbull, and Parliamentary Secretary Paul Fletcher announced on Thursday that the 499 new or upgraded towers will cover more than 68,600 square kilometres extra for new mobile coverage, and 150,000 square kilometres for mobiles with external antennas to 3,000 blackspots in total.

The original plan was for the government to offer up to AU$100 million in investment alongside the telcos for areas that the government determined to be lacking mobile coverage in regional and rural Australia. The AU$100 million in round one will lead to a total AU$385 million invested by governments and industry. The New South Wales government is also kicking in AU$24 million, while Victoria is stumping up AU$21 million, and Queensland AU$10 million.

Western Australia is also investing AU$32 million, while Tasmania is investing AU$350,000. Local governments and community organisations have also put in AU$1.7 million.

Telstra gets the lion's share of the funding, at AU$165 million over three years, while Vodafone will receive AU$20 million over three years..

There will be 144 new or upgraded towers in New South Wales, 110 in Victoria, 68 in Queensland, 130 in Western Australia, 11 in South Australia, 31 in Tasmania, and five in the Northern Territory.

The telcos were asked to nominate areas where they would like to build or upgrade towers that they weren't already planning to upgrade, and the government assessed the applications on that criteria.

The first set of towers will begin being funded before the end of this year, and will be determined by Telstra and Vodafone based on where they can receive local government approval for the upgrades.

Telstra has also agreed to build 200 4G mini base stations in the second half of 2015 in small towns that will provide a radius of 200 to 300 metres of 4G coverage. The government will need to agree to the locations of the mini base stations before Telstra can begin construction.

A rollout map for the towers funded in round 1 can be found here.

The funding was welcomed by Vodafone's director of strategy and corporate affairs Dan Lloyd.

"Mobile customers in regional Australia have been disadvantaged for far too long with inadequate coverage and a lack of effective competition. The federal government's announcement is a great step forward towards giving customers in regional areas better coverage and, often for the first time, the opportunity to have a choice of mobile provider," he said in a statement.

"We are looking forward to being a part of these communities. We will be moving forward to bring these sites into operation as soon as possible, so that we can offer more customers in regional Australia the same great service and value we provide on our network today."

The company has long been critical of governments subsidising incumbent mobile network provider Telstra in building out its mobile network, but on Thursday welcomed the funding it will receive to build out its own network.

Telstra's group managing director of networks, Mike Wright said Telstra's investment in new towers would be open to its competitors, too.

"We will be offering other carriers the opportunity to use space on our towers to install their own equipment and offer services to their customers from these towers, in accordance with existing industry practices," he said.

"Our competitors are well-resourced and free to invest in extending their networks into previously unserved regional areas. So this is not just good news for Telstra customers but an opportunity for all carriers to invest in expanding their coverage in regional Australia."

Australia's second-largest telco, Optus, was absent from the first round of funding. A spokesperson for the company said Optus would continue to work with the government.

"We are committed to communications for all Australians, and regional Australia is a key beneficiary in Optus' recent major telecommunications investment announcement. Whilst unsuccessful on this round, we continue to work with the government on ways to improve communications services in regional Australia -- including infrastructure-sharing opportunities. Regional telecommunications remains a challenging policy area, given Australia's geography, infrastructure needs, and legacy USO arrangements -- these are problems that can't be fixed in a day, but they do need to be fixed," the spokesperson said.

"We are working with the government on this, and believe we will have future opportunities to contribute more directly."

The federal government is also having a second round of funding with another AU$60 million on the table. The government said it will use the existing work it has done on round 1 with Telstra, Optus, and Vodafone on potential locations to determine the next round of towers to be funded.

Round two will commence in 2016.