Telstra ends Kaz sale process

Telstra today put an end to its long-running attempt to sell its IT services subsidiary Kaz, saying it would keep the company.

update Telstra today put an end to its long-running attempt to sell its IT services subsidiary Kaz, saying it would keep the company.

Telstra CEO Sol Trujillo
(Credit: Telstra)

"We have decided to keep Kaz as a key offering in the enterprise market," Telstra chief financial officer John Stanhope told the audience at the telco's annual earnings call this morning.

Telstra has been shopping Kaz around for some time, with rivals such as Japanese giant Fujitsu and CSC having taken a strong look at the firm.

Telstra bought the company in 2004 for $333 million, but Telstra CEO Sol Trujillo is believed to see the IT services market as tangential to Telstra's core telco business.

"We've divested certain assets in the last couple of years," Telstra CEO Sol Trujillo told gathered reporters. "We had [Kaz] up for conversation."

Although Telstra does not break out Kaz's revenues, the subsidiary appears to have been slipping financially, with Telstra's IT services segment (including Kaz) clocking up a 15.8 per cent year-on-year decline in revenues from $501 million to $422 million for the year to 30 June 2008.

According to Telstra, $40 million of the revenue decline can be blamed on the sale of Kaz assets Australian Administration Service, Kaz Business Services, Kaz Software Solutions and Sensis' Invizage. However, that still left $39 million less money flowing in for the remaining assets than last year.

Despite the numbers, Trujillo said that by undertaking measures such as further integration into the company, Telstra could "make something that doesn't look so attractive more attractive".

"We felt that we could create more value ... than we have in the past," he said.

Kaz holds a number of key outsourcing contracts with large clients such as the Department of Defence.