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Telstra traces decline of 'golden egg' Sensis to GFC and Google

A former Telstra CEO once dismissed the threat of Google on Sensis as just 'Google, schmoogle'; now, the company is selling off its majority stake in the directories business for close to 5 percent of its value just nine years ago.
Written by Josh Taylor, Contributor

As Telstra CEO David Thodey prepares to fly out to the United States to take part in a Silicon Valley-related event as part of the G'Day USA campaign, he has finalised a deal to sell off the majority of a company that was one of the biggest victims of the rise of Silicon Valley.

Sensis was going to be bigger than Google, if you believed former Telstra CEO Sol Trujillo in 2005. Now, the company is blaming a global decline of directories businesses and the impact of the global financial crisis (GFC) as it sells a 70 percent stake in Sensis for AU$454 million.

Sensis, the Telstra-owned company responsible for printing the White Pages and Yellow Pages directories for businesses and residents, was once viewed as a "golden egg" for Telstra, with the rivers of gold in advertising revenue flowing to the business. It was valued at up to AU$12 billion in 2005.

At the time, Trujillo was dismissing the impact of the Google search engine in Australia, because Sensis was better at knowing what Australians want.

"Google, schmoogle," Trujillo said at the time.

"We're outgrowing Google in Australia. We're doing more, we're growing faster, and we have more capability, because we're more relevant."

Fast-forward to 2013, and that AU$12 billion company is now valued at AU$649 million. Current Telstra CEO David Thodey declined to comment on his predecessor's dismissive comments about Google at the time, but today told journalists that the GFC had a huge impact on the value of directories businesses around the world.

"After the GFC, life changed, and we can't go back before that period. If you look at any directories business sold since then, this is the valuation of the change," he said.

"So it is what it is."

He declined to blame Google for Sensis' woes.

"We enjoy a strong relationship with Google on many different fronts, and the industry has gone through significant change right around the world. Now it's about how we move forward."

Thodey compared the decline of the business to the similar values of AT&T and BT's directory businesses. AT&T sold a 53 percent stake in its directories business to Cerberus Capital Management for $750 million in 2012, while BT exited the directories market in 2001 when it sold off Yell, only to re-enter the industry in 2008 when it bought Ufindus for £20 million.

Telstra is keeping a 30 percent stake in the company, with Sensis operating as a separate entity owned in majority by Platinum Equity. Thodey denied that the decision to retain that portion had anything to do with Telstra's obligation as part of its carrier licence to continue to print the White Pages directory.

"We believe that by retaining the 30 percent, we can help in this transition by leveraging in partnership our small and medium business presence across Australia," he said.

He said that Telstra had reviewed its licence conditions before the sale, and Telstra had given the government a heads up prior to the announcement.

"Now we need to go through the details with the department [of communications] and the respective regulatory bodies as we make sure we fulfil all these obligations under this new structure," he said.

Thodey said the obligation to print the directories is something to be examined by the industry and the government.

"We need to be looking at what this digital-enablement world means to many, many print services. We need to be, I think, considerate to those who are not feeling as well educated in digital access to this technology, while seeing the enormous change we're seeing across the majority of the population," he said.

"It's a balancing act, and I think we'll need to work through that with both the department and the regulatory bodies."

While the obligation to print the White Pages remains, the future of the Yellow Pages, the business directory, is less certain. Thodey said today that Sensis would continue to print it "where necessary".

"The new Sensis entity will continue to print the Yellow Pages where we think it is necessary," he said.

"That will be a progressive consideration, and it is very, very localised in geographic sense. We find the value of the Yellow Pages in some very dense metro areas is far less than in the rural/regional areas. It will be a transition over a period of time."

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