Telstra plays 'Cricket'
- 05 August, 1999 22:00
A leading local electronic commerce analyst describes Telstra recent A$150 million Internet shopping spree as "only the entree, the main course is yet to be served."
"I don't think (Telstra) is going to stop at one or two investments," said APT Strategies Managing Director Marc Phillips. "There could be a dozen in the pipeline. Telstra is taking a number of small stakes and spreading its money to hedge its bets."
Telstra begs to differ. A company spokesman said the recent acquisition program was codenamed 'Cricket.'
"There were three stumps and we got them all. There are no bails," he said. However, as every cricket fan knows, the game isn't over until a lot more wickets fall.
Last week, Telstra made its third significant Internet equity investment in as many months paying $50 million to take a 15% slice of Solution 6. A week earlier, the carrier snapped up a 10% stake in Sausage Software at a cost of $19 million. In June, Telstra purchased 5% of Computershare for around $84 million.
In addition to the initial investments, Telstra holds options to purchase more of all three companies. Ultimately, it could soon own 25% of Solution 6, 40% of Sausage and 15% of Computershare.
Significantly, all three companies are Australian-owned and operated. Telstra says they were chosen for their strong growth potential, substantial Internet offerings and strong customer bases -- particularly with Australia's small and medium-sized enterprises (SMEs). They also operate in strong economic sectors.
"When a company as big as Telstra does something like this, it's a pure play," Phillips said. "It's strategic. It is serious about getting into the e-commerce market, but it wants to do it flexibly and without taking on a lot of risk".
He says the Telstra strategy is far-sighted and aimed at quickly rolling out the tools and infrastructure required to catapult Australia's small and medium-sized enterprises into the global e-commerce arena. "Australia has a lot to gain. It's really good news for our SMEs and regional businesses as they'll be able to play in world markets," he said.
The Solution 6 deal includes a strategic relations agreement to provide integrated network solutions and to develop one or more portals for the financial sector. However, the jewel in the crown of the deal is Solutions 6's application service provider (ASP) business.
ASP enables customers to run applications using a browser and pay a rental fee rather than take on the full on-site running costs. Telstra expects to market Solution 6's ASP products to its SME customers.
Phillips said that the Sausage Software deal will give Telstra an e-commerce-in-a-box package which it can quickly roll out to its SME customers. Once the SMEs climb onboard, they'll become customers for a wider range of value-added Internet services, he added.
It's a strategy that Phillips believes has taken Telstra's competitors by surprise. He said that Cable & Wireless Optus Ltd. is now behind the play with Internet content and an SME e-commerce application. He said Optus will probably make a move in the near future, while Australia's second-tier telecommunications companies will need to do something similar.