Telstra ups the ante in China with two acquisitions

Wednesday, 11 February, 2009

In a continuation of its media-comms strategy, Telstra has acquired a 67% interest in both China M and Sharp Point.  China M is a leading supplier of consumer mobile content serving 350,000 customers daily, while Sharp Point provides technical services for China Mobile’s rapidly growing central mobile music platform.

Together the businesses enjoy strong commercial and contractual links with the country’s mobile telecoms providers.

The terms of the deal are attractive to all parties. Telstra will fund the acquisitions from existing cash facilities.

The acquisitions put Telstra in a central position in the mobile data value chain in China, where the company is already a market leader in three key online business segments: real estate, automotive and consumer electronics.

“Today we’ve added consumer mobile content and music to Telstra’s online real estate, automotive and digital device businesses in China, expanding our position in the world’s fastest-growing online market,” Telstra’s Chief Executive Officer, Sol Trujillo, said.

“Our success with the Telstra Next G network shows that Telstra knows how to offer customers a compelling mobile data experience. We are now exporting that expertise to China.

“As I said last August, we expect Telstra’s Chinese online and content businesses to generate AU$1 billion of revenues within five years, generating strong returns. Today’s acquisitions will make significant progress towards that aspiration.

“We also believe that pro forma revenues from China M and Sharp Point for fiscal 2009 will be around AU$100m. Both businesses are EBITDA and EBIT positive today, and we expect the acquisitions to be earnings-per-share accretive from 2010.”

China is already the world's largest online market, as well as being the world's largest mobile phone market. China has more than twice as many mobile subscribers as any other nation — and penetration is only about 50% at this stage.

While Australia has approximately 20 million mobile phones, China had more than 600 million by mid-2007, according to Merrill Lynch. Analysts forecast the Chinese mobile market will continue to grow at double-digit rates for at least the next several years.

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