Telstra Corporation Ltd sells majority stake in Sensis for $454 million

Telecom giant keeps 30% ownership.

Darryl Daté-Shappard

I started investing after finding a copy of Peter Lynch's "Beating the Street" in the English book section of a library in Japan, where I was living at the time in 1997. Seeing that regular people can find investment ideas just as easily as professionals, I used the philosophy of that book to invest in stocks in Japan, and later in Australia after moving in 2001. I also have experience in property investing, and went on to complete my masters degree in Applied Finance at QUT in Brisbane. I follow the investment style of Peter Lynch, Phillip Fisher and Warren Buffett-- knowing what you invest in, doing your homework to keep up with a stock's story and holding a healthy skepticism of what the stock market calls "value".

Published January 13, 2014 10:04 am AEDT

Telstra Corporation Ltd (ASX: TLS) has seemingly decided to sell-off assets in preparation for big changes in the near future. The latest plan is to sell Sensis, the business that operates Yellow Pages, White Pages, The Trading Post, as well as CitySearch and Sensis Digital Media.

The company sees how the internet and consumer usage of it is changing the face of the business and the sale can open up capital for expansion in digital media and entertainment. In its 2013 annual report, Telstra wrote: "Sensis is a changing business and is challenged by the transition from its previous print based business model to the new digital model. It is a completely new business model that requires greater agility and efﬁciency to compete."

The US private equity firm Platinum Equity wants to purchase a controlling stake in Sensis. However, Telstra has just announced it will retain a 30% stake to remain involved in future growth and customer service. Platinum Equity will pay $454 million for the other 70%.

Telstra expects to book an accounting loss on Sensis of approximately $150 million, subject to completion timing and adjustments. Approximately $100 million is expected to be included in the December 2013 half-year results, with the balance accounted for on completion, which is expected in the second-half of FY 2014.

The sale proceeds of $454 million are incremental to Telstra's FY 2014 free cash flow guidance of $4.6 billion to $5.1 billion.

Sensis will continue producing and distributing the White Pages Directory as required under the conditions of Telstra's carrier licence. Telstra will also continue to provide directory assistance, 1223, services as required under the conditions of its carrier licence. Voice services including the 1234 and 12456 services are a part of Telstra's core telecom offering and will continue to be operated by Telstra as an ongoing supplier to Sensis.

Foolish takeway

In November Telstra announced it was preparing to list its China car sales website Autohome on the New York Stock Exchange. In December it revealed that it was to sell its Hong Kong-based CSL mobile phone services business to HKT for US$2.43 billion.

Telstra should be commended for its forward thinking and embrace change rather than resist it. Stock market history is littered with failed companies that lost their relevance and competitive advantage when new technology came along.

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