It's Telstra Network lock in Australia!!
You need to Unlock it using the Unlock code,You can get the code from
and get the Free Unlocking Instructions from here
and Unlock it step by step...
Xperia X8 Unlocking Instructions
Warning: Do not enter any wrong unlock unlock
codes on your Sony Ericsson Xperia X8 mobile phones. If you enter over a
certain amount of wrong unlock codes on your mobile phone, your phone
may get hard locked and sometimes become unusable.
1. Switch ON your Sony Ericsson Xperia X8 with a Not Allowed
2. Your Sony Ericsson Xperia X8 will request to enter an unlock code.
3. Tap the box where you have to input the code and a number pad will appear.
4. Type in the unlock code we send to you.
5. Press the 'Unlock' button on the phone.
6. Your Sony Ericsson Xperia X8 phone should now be unlocked.
*NOT ACCEPTED : We mean, to use a sim card from a network other than the network your Sony Ericsson Xperia X8 is locked to.