The Australian Communications Consumer Action Network (ACCAN) has expressed concern that the error has provided the personal details of customers - including 23,500 silent line customers - to incorrect recipients.
The letters were delivered to home and business customers and contained the customer's name, telephone number, details of their telephone plan and, if applicable, reference to their pensioner discount.
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No billing or call record information was contained in the mail-out.
ACCAN chief executive Teresa Corbin said on Wednesday the magnitude of the breach was "deeply concerning".
"While Telstra appears to be taking swift action on this matter they must continue to invest great effort into ensuring every customer affected has the problem resolved to their complete satisfaction," Ms Corbin said in a statement.
Australian Privacy Commissioner Timothy Pilgrim has launched an investigation into the error, the organisation said in a press release on Wednesday.
A Telstra spokesman told AAP on Wednesday the telco had begun contacting affected customers on Wednesday by phone and mail to notify them after the bungle was discovered last Friday.
Any concerned customer should call Telstra on 1800 307 987 and if unsatisfied with the remedies offered by the telco should contact the Office of the Privacy Commissioner on 1300 363 992.
