Telstra's directories sale boosts cash stockpile

Telstra has sold off its shrinking directories business Sensis as it builds up a multibillion-dollar stockpile of cash to fund investment and, possibly, higher returns for shareholders.

The telco has agreed to sell a 70 per cent stake in Sensis, which includes the white and yellow pages business, to US-based private equity business Platinum Equity for A$454 million ($492 million).

Telstra will retain a 30 per cent stake in the business and will retain its voice services business, which was previously included as part of Sensis.

The deal values Sensis at A$649 million, which is just 2.4 times its expected 2013/14 financial year earnings and well below the A$3 billion price tag analysts had expected.

It is also a far cry from the reported A$10 billion-A$12 billion valuation placed on Sensis when Telstra considered selling it in 2005 and 2006.

Chief executive David Thodey said now was the right time to sell Sensis and refused to dwell on the lost opportunity to cash in almost a decade ago.

"After the GFC, life changed and we can't go back before that period," Thodey said.

IG market strategist Evan Lucas said even at the lower valuation, the sale was still in Telstra's best interests given the ongoing decline in revenues, especially from the print arm of the business.

"It has just been haemorrhaging money and there's no reason to hold on to it any longer," he said.

Telstra will make an accounting loss of around A$150 million on the deal, but the A$450 million pay cheque will add to a growing stockpile of cash available for the telco to invest or return to investors through a special dividend or share buybacks.

Thodey said that Telstra was still looking at how to spend the money.

"We must continue to look at where we invest, to drive returns for shareholders, but we are also very conscious that our shareholders at various times would appreciate a return in terms of dividends," he said.

Lucas believes the Telco will likely sit on the money for a while but says the company needs to find new ways to grow, possibly through investments overseas.

"Because revenue growth this year is supposed to be so low, between 4 and 6 per cent, they need to start building a war chest," he said.

"[But] they have market saturation [in Australia] and they have the ACCC, which probably not going to allow them to go hard anywhere in Australia with regards to mergers and acquisitions."

- AAP

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