Published on the 22/01/2014 | Written by Newsdesk
By March Telstra expects to know whether it has the regulatory green light for the sale of 70 percent of directories business Sensis; it already knows that waiting this long to sell it has cost it billions…
Telstra announced last week that it would be selling 70 percent of directories business Sensis to US private equity business Platinum Equity for $454 million, subject to Foreign Investment Review Board approvals. The deal values Sensis (in which Telstra will retain a 30 percent stake) at $649 million.
Sensis produces, and will continue to deliver, the White Pages telephone directory. It has also produced the Yellow Pages business directory – although in the future this seems likely to be limited to a rural and regional product.
In the heady mid 2000s the Sensis directories business was valued at $12 billion. Even last year Telstra’s annual report valued Sensis at $851 million.
But with the rise of online search, Telstra’s directories business has been declining at a rate of 20 percent a year – the business booked earnings of $570 million in 2013, expected to slip to $450 million this year – to wait any longer could have prompted a fire sale. Even as it stands Telstra will book a $150 million loss on the sale to Platinum.
Since announcing the deal last week Telstra management has been singularly upbeat – saying the arrangement will unshackle Sensis, allowing it to compete more effectively in the future, while still allowing Telstra to fulfil its carrier licence obligations in terms of providing directory access. Telstra CEO David Thodey meanwhile said that Telstra will restructure its own media content business; “We will make it sort of a rich content experience on the mobile…and of course the relationship with Foxtel in terms of video content is still very, very important. We’ve got a lot of plans in that area.”
The fact is that Telstra has over the last several years failed to make Sensis fly, despite multiple restructurings and leadership shuffles. Had it offloaded the declining division several years ago Sensis would have been much better placed to shift direction, and Telstra shareholders would have benefitted from a higher price for the asset.
The sale of Sensis, while arguably late, is part of an ongoing programme within Telstra to streamline itself in preparation for the NBN era and increasing competition across all its business units. In 2012 it sold off New Zealand business TelstraClear, last year it sold off CSL, its Hong Kong mobile offshoot, now Sensis. Surely the classified advertising business, Trading Post, which sticks out like a sore thumb in the Telstra portfolio, must be next if it can find a suitable buyer.
