Telstra seeks import gains from China tech platforms

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Telstra seeks import gains from China tech platforms

Telstra may use the technology underpinning two Chinese mobile and online content businesses it acquired $302m controlling stakes in today to help scale up local operations at lower per-unit costs, chief executive Sol Trujillo said.

The telco said it has acquired a 67 percent interest in both China M and Sharp Point.

China M serves mobile content to 350,000 customers daily, while Sharp Point provides technical services for China Mobile's central mobile music platform.

"The sophistication of their technology platforms is impressive," Trujillo said.

"We see synergies not only exporting some of our experience and capabilities there but also importing their knowledge and technology platforms to help deliver massive customer volumes at lower unit costs [in Australia]."

Trujillo said the acquisitions would help Telstra achieve its target of $1 billion in revenue from its Chinese media assets by 2013. Assets also include stakes in SouFun, Norstar Media and Autohome/PCPop.

And while Trujillo denied that the latest acquisitions were motivated by Telstra seeking alternative paths after its removal from the NBN, he expected revenues from the China business would surpass Telstra's expectations of NBN revenues.

"When I gave a presentation to the Citigroup conference earlier this year, we sat down and looked at the downsides of NBN exclusion and quantified benefits over ten years of about a billion dollars [if we'd been chosen to build the network]," Trujillo said.

"Here we have investments in China that will replace that [lost revenue potential] with less capital investment. But these acquisitions are part of our [ongoing China strategy though] and have nothing to do with the NBN."

Trujillo said that margins for both China M and Sharp Point fall in the region of 30 and 40 percent.

Telstra also said the total acquisition cost is $302 million "although there are some earnouts associated with the purchase".

The cash amounts would be accounted for as $178 million this financial year and $124 million spread across the following two years.

Telstra is banking on predicted near-term economic growth in China of between six and eight percent and the sheer market volume to hit anticipated revenue targets.

It quoted figures from Merrill Lynch that while Australia has approximately 20 million mobile phones, China had more than 600 million by mid-2007.

The mobile market would continue to grow at double-digit rates for at least the next several years, Telstra said, quoting "analysts".

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