Locked iPhone when told it is unlocked

[l3861th]

I have recently purchased an iPhone which I am told is UNLOCKED. This iPhone came with a Telstra sim card. I removed the Telstra sim card and inserted another sim card from a second iPhone and knowingly the second iPhone works perfectly fine.

It appears that this iPhone is locked because information from the previous owner....phone carrier.....comes up on the screen.......Telstra6A---D. 

I do have the option of choosing another network and when I do, it's rejected.

Can someone please offer some advise what I should do.  

[tstore]

Have you contacted the seller?

If you paid via PayPal, open up an item not as described case and follow the prompts. You will be requested to send it back to the address on PayPal via trackable means

[toycrazyau]

I recently upgraded my phone and gave my iphone4s to my sister who uses another network.

I asked if they could unlock my old phone as I was giving it to someone else and I was told that to unlock it all I had to do was to restore it to factory settings. I did that, my sister popped in her SIM card and it was all ok.

The only thing I am unsure of is if you can do the factory restore yourself through iTunes or if the original owner has to do it.