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28-10-2014, 07:43 PM
Telstra allots $1bn for Asia growth
OCTOBER 28, 2014 9:00PM
Mitchell Bingemann
Reporter
Sydney
Telstra is putting aside up to $1 billion to spend on overseas acquisitions, partnerships and infrastructure investments as it looks to establish its foothold in the burgeoning Asian region.
The telco has in the past articulated its desire to boost its growth options in Asia, but until yesterday it did not reveal how much it planned to spend on infrastructure in the region to establish its presence.
“I would expect to potentially have some involvement in the infrastructure build and therefore some capital investment, but I think that would be more in the order of hundreds of millions rather than the billions of dollars,” Telstra chief financial officer Andy Penn told investors and analysts at the company’s annual strategy day in Sydney.
Telstra’s Asian strategy is being driven across three platforms: to grow its global enterprise services division, capitalise on the technology shift in Asia from 2G and 3G mobile services to 4G, and the establishment of consultancy services to help incumbents build data-oriented networks. It is in the construction of new high-speed mobile services in the region, which a growing middle class is increasingly looking to access, that Telstra is most likely to invest its expertise and capital in.
“There is a bottleneck around that infrastructure and we believe there needs to be a transition to data-based networks both from a technology point of view and a business point of view,” Mr Penn said.
“That’s clearly where we believe we can play a role.”
Mr Penn ruled out buying any large-scale businesses in Asia but said the telco was actively looking for bolt-on investment opportunities in infrastructure and consultancy services.
“If you look around the region, realistically the opportunities to buy existing incumbents at a price which will drive shareholder value are pretty limited,” Mr Penn said.
“But we do think there are opportunities partly where we can support infrastructure and to deploy our capability to help companies make that transition.
“It could involve some infrastructure investment and it could involve some consultancy and other softer involvement as well.”
Any acquisition or partnership opportunities in Asia will be carefully scrutinised by Telstra for earnings potential, particularly as foreign investments in the region remain under strict foreign ownership curbs because of the critical nature of telecoms infrastructure.
Telstra earlier this year signed the first of what it hopes will be many new deals in Asia.
The profit-sharing deal with Telkom Indonesia is a joint venture that will provide telecom services to enterprise customers.
Under the deal, Telkom will own a 51 per cent stake in the joint venture and Telstra 49 per cent.
Both companies are investing “tens of millions of dollars” to get the new division ready for operation and sales early next year.
The establishment of the JV is the latest move by Telstra to boost its growing Network Application Services division across the region, a target that chief executive David Thodey has highlighted as a key growth area.
The portfolio, which provides enterprise and business customers with managed network and cloud-based communications services, increased revenue 27.8 per cent to $1.9bn in the year to June 30.
Over the next decade, Telstra wants to establish its growing portfolio of enterprise services as a core revenue contributor alongside its mobiles business, worth $9.2bn a year.
This article first appeared in The Australian Business Review.
OCTOBER 28, 2014 9:00PM
Mitchell Bingemann
Reporter
Sydney
Telstra is putting aside up to $1 billion to spend on overseas acquisitions, partnerships and infrastructure investments as it looks to establish its foothold in the burgeoning Asian region.
The telco has in the past articulated its desire to boost its growth options in Asia, but until yesterday it did not reveal how much it planned to spend on infrastructure in the region to establish its presence.
“I would expect to potentially have some involvement in the infrastructure build and therefore some capital investment, but I think that would be more in the order of hundreds of millions rather than the billions of dollars,” Telstra chief financial officer Andy Penn told investors and analysts at the company’s annual strategy day in Sydney.
Telstra’s Asian strategy is being driven across three platforms: to grow its global enterprise services division, capitalise on the technology shift in Asia from 2G and 3G mobile services to 4G, and the establishment of consultancy services to help incumbents build data-oriented networks. It is in the construction of new high-speed mobile services in the region, which a growing middle class is increasingly looking to access, that Telstra is most likely to invest its expertise and capital in.
“There is a bottleneck around that infrastructure and we believe there needs to be a transition to data-based networks both from a technology point of view and a business point of view,” Mr Penn said.
“That’s clearly where we believe we can play a role.”
Mr Penn ruled out buying any large-scale businesses in Asia but said the telco was actively looking for bolt-on investment opportunities in infrastructure and consultancy services.
“If you look around the region, realistically the opportunities to buy existing incumbents at a price which will drive shareholder value are pretty limited,” Mr Penn said.
“But we do think there are opportunities partly where we can support infrastructure and to deploy our capability to help companies make that transition.
“It could involve some infrastructure investment and it could involve some consultancy and other softer involvement as well.”
Any acquisition or partnership opportunities in Asia will be carefully scrutinised by Telstra for earnings potential, particularly as foreign investments in the region remain under strict foreign ownership curbs because of the critical nature of telecoms infrastructure.
Telstra earlier this year signed the first of what it hopes will be many new deals in Asia.
The profit-sharing deal with Telkom Indonesia is a joint venture that will provide telecom services to enterprise customers.
Under the deal, Telkom will own a 51 per cent stake in the joint venture and Telstra 49 per cent.
Both companies are investing “tens of millions of dollars” to get the new division ready for operation and sales early next year.
The establishment of the JV is the latest move by Telstra to boost its growing Network Application Services division across the region, a target that chief executive David Thodey has highlighted as a key growth area.
The portfolio, which provides enterprise and business customers with managed network and cloud-based communications services, increased revenue 27.8 per cent to $1.9bn in the year to June 30.
Over the next decade, Telstra wants to establish its growing portfolio of enterprise services as a core revenue contributor alongside its mobiles business, worth $9.2bn a year.
This article first appeared in The Australian Business Review.