Telstra Buys Asian Dot Com
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Telstra of old has emerged following the announcement that the Company has bought a controlling stake in a Chinese Internet business as it seeks growth ahead of an A$8 billion share sale this year. During the dotcom era Telstra under the guidance of Ted Pretty spent millions buying up or investing in dot com operations while also investing in Asia. Very few deals delivered a return.

Telstra will pay $254 million for 51 percent of SouFun Holdings Ltd., which operates a real estate and home furnishing Web site, the Melbourne-based company said in a statement today.

Chief Executive Officer Sol Trujillo, who joined the company in July 2005, is seeking growth outside his main landline telephone business, which is losing customer to rivals and cheaper wireless and Internet services.

“Telstra is trying to create the impression they’ve got growth assets,” said Tom Elliott, managing director of hedge fund MM&E Capital Ltd. in Melbourne, which manages the equivalent of $92 million. “As a cynic, they’ve tried it all before and only succeeded in tearing up money.”

Trujillo’s predecessor, Ziggy Switkowski, lost more than A$3 billion in a failed Asian expansion during his six-year tenure.

“SouFun provides an attractive entry point into China, one of the world’s fastest growing economies,” Trujillo, who has visited the country at least twice this year, said in a statement.

The government last week slashed a planned sale of its Telstra stake by more than half to A$8 billion after a slump in earnings sent the shares to a record low. The remainder of its 51.8 percent stake will be placed in a government investment fund.

In December, Telstra agreed to merge its Hong Kong wireless unit CSL with New World Mobile Holdings Ltd. to create the territory’s biggest mobile phone company. Telstra also jointly owns Hong Kong’s undersea cable operator Reach Ltd. with PCCW Ltd.

Telstra, which earns more than 90 percent of its revenue in Australia, is losing market share to rivals including Singapore Telecommunications Ltd. and Vodafone Group Plc.

Separately, the Melbourne-based company sold its pension services unit Australian Administration Services for A$215 million ($163 million) to Sydney-based investment company Pacific Equity Partners, making a profit of A$56 million.

Telstra shares rose 1 cent to A$3.60 at the 4:10 p.m. close of trade in Sydney. The stock has fallen 23 percent the past year.