Telstra sells majority stake in Sensis to American private equity firm

Telstra will sell 70% of its Sensis business to Platinum Equity, an American private equity company, the company announced today.

Sensis is Telstra’s directory arm, and publishes the White Pages, the Yellow Pages and the Trading Post, as well as its online business directory. The business has struggled in recent years, after losing the monopoly it once had on small business advertising. Before the internet, it was one of the most profitable parts of Telstra.

The controlling stake in the business will change hands for $454 million, which is significantly below the mooted price in earlier media reports, which suggested Sensis would change hands for $3 billion.

Telstra CEO David Thodey says the new partnership will help maximise the value of Sensis for Telstra shareholders.

“We’ve spent two years managing the transition from a print to digital directory system,” he told an analyst’s briefing today.

“Many of you will be aware that directories businesses right around the world have been experiencing massive change. Telstra is one of the last telcos to own a directories business. We need to continue to help this business transform. We think that to drive this momentum, it’s appropriate at this time to introduce a partner like Platinum Equity.

“The fact that we’re retaining a 30% stake shows our belief that [Sensis] will continue to lead the market, and deliver value to Telstra shareholders as it transforms.”

Thodey added that there continued to be synergies between Sensis’ small and medium business customers, and Telstra’s core telecommunications business, which Telstra wanted to remain exposed to.

Platinum Equity will operate Sensis as a standalone business. However, Thodey said it would be “business as usual” at Sensis for the next few months.

Telecommunications analyst Paul Budde tells SmartCompany the sale is a sign of Telstra’s wasted opportunity.

“Sensis has lost its glamour because it’s no longer the way people search for businesses,” he said.

“To a large extent, Telstra missed the boat on that. By moving more quickly five to seven years ago, they could have competed with the Facebooks, Googles and Amazons of the world. But instead, their strategy was to protect the income they got from the Yellow Pages as much as possible, and not cannibalise it by moving into a new direction. But eventually, you can’t milk any more, and that’s the situation they’ve reached now.”

Despite this, Budde says, Sensis remains a valuable asset.

“It’s a large database. A company that’s far more niche than Telstra can look at that database and find opportunities for what to do with it. But you need a company more directly linked into things like publishing and advertising, which Telstra isn’t. Telstra’s always been a telecommunications company.”

For the businesses that advertise their details on Sensis or the Yellow Pages, Budde says the sale is unlikely to result in a substantial change.

“It wouldn’t make sense to change the directory,” Budde says. “The value is in the database.  A business with lower overheads, that’s more innovative, can make the most of it.”

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