Telstra cleared for takeover of True Local

Shareholders might be asking what benefits it brings, in the face of intense competition from Google

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published March 28, 2013 2:00 pm AEDT

Telecommunications giant, Telstra Corporation (ASX: TLS) has been given approval to acquire the True Local directories.

The Australian Consumer and Competition Commission (ACCC) today said that it would not oppose the deal, citing stiff competition from Google. Telstra is buying True Local from News Corporation (ASX: NWS), and will integrate the website into its existing Sensis business, which runs the Yellow and White Pages and the Trading Post.

Telstra shareholders may be wondering where the value is in a business like True Local. As the competition regulator says "The merged firm would likely be strongly constrained by Google and its myriad of products that are increasingly replicating the online business directory listing model."

Sensis has struggled to compete with Google and other online search services, and its printed Yellow and White Pages products are increasingly seen as irrelevant. Their combined digital revenues are low and growing at a snail's pace, under intense pressure from Google's products. Showing how Sensis is a rapidly declining business, revenues fell 16% to $1.5 billion in 2012, following a 6% fall in 2011.

The Trading Post was practically essential before the internet age if you wanted to buy or sell something second hand, but the arrival of EBay and the rise of Carsales.com (ASX: CRZ) and even Fairfax Media Holdings' (ASX: FXJ) Drive website have virtually killed the Trading Post as a thriving business. Telstra has already seen the writing on the wall and an attempt to sell the Trading Post to Carsales.com was blocked by the ACCC. That will likely see the Trading Post die a lingering death.

Foolish takeaway

While the acquisition of True Local may be an attempt by Telstra to revive its Sensis business, shareholders would probably be hoping that the telco jettisoned Sensis as a whole, and concentrated on its growing industries such as mobile, broadband, Foxtel and cloud and data centre services.

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Fairfax Media.

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