All the buzz last week was around a possible bid for Telecom’s troubled Australian subsidiary AAPT by Asian firm Pacnet, which appears to have big regional ambitions.
I spoke to a few people about that possibility and it was hard to find anyone who felt Telecom should retain the business, especially if there was a half decent offer on the table.
When business is down, the rationale presented by both Telstra for its occasionally profitable TelstraClear operation in New Zealand and by Telecom for AAPT is something about “servicing trans-Tasman clients”.
Analyst Paul Budde was not impressed with that argument during his recent roundtable series in New Zealand and it is quite clear there are other ways to service such customer requirements.
So if that is not vital, why do Telstra and Telecom retain, and even invest further in these subsidiaries.
Well, firstly, they are very different businesses and shouldn’t really be perceived as analagous. For starters, TelstraClear has been profitable in two out of the last three financial years. It has a damn good data network, but is also a bit of a one-trick pony and a disappointment to those who saw and still see it as a potentially major competitor to Telecom.
That said, in winning both Transpower and Defence contracts in recent weeks things are definitely looking up for TelstraClear. Its parent company has also shown a willingness to sign-off on local network investment.
It is hard to see Telstra selling the company in those circumstances unless it gets a very attractive offer. TelstraClear is chump-change for Telstra. As long as it isn’t bleeding it isn’t really a problem. And it doesn’t bleed as long as it doesn’t try anything too fancy.
Telecom was also willing to invest further (and further) in Australia, at least under former CEO Theresa Gattung. Her ill-fated buy of AAPT was followed by a further investment in Powertel. Telecom’s AAPT investment has been written down considerably since it was bought for what now seems an incredible $2.2 billion.
But under Paul Reynolds, Telecom is much more focused on its core business and on “transformation” than international adventures.
AAPT, for instance, was until recently shaping up as an investor in Australia’s National Broadband Network as part of the Terria consortium put together by Telstra’s rivals.
The reason was simple; Telecom wanted to focus on its very considerable New Zealand network and infrastructure investment.
That was great news for New Zealand and a sign that Telecom is finally realising that its core business is here.
The next stage of that realisation is the sale of AAPT.