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Report says Australia's Telstra Corp in talks to divest Sensis in $2.7B deal

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January 11
2:02 AM 2014

Citing a report from Australian media, Reuters reported that Telstra Corp is in advanced discussions with a private equity company to exit Sensis for a price tag of $2.7 billion or A$3 billion. Telstra Corp is the largest telephone company in Australia while Sensis is its unit engaged in the business of publishing directories like the White Pages and the Yellow Pages both in print and online.

Unnamed sources told the Australian Financial Review that the sale of the directories business could be finished as early as next week, Reuters reported. The report did not identify the name of the US private equity firm.

For the 12 months that ended in June 2013, Telstra posted a 13% increase in net profit after tax to A$3.9 billion due to strong growth of its mobile business. The year before that, the company's profit was only at $3.4 billion.

For the same period, the Sensis unit was able to generate earnings before interest, taxation, depreciation and amortization or EBITDA of A$571 million which represented a decrease of 22% from that of the year before. In a results briefing held in August, Chief Financial Officer Andrew Penn told investors that shifting Sensis to a digital model continues to be a challenging undertaking.

Reuters reported that selling Sensing would pump the coffers of Telstra with over A$8 billion, money it could use to support new growth enterprises and technology services. It could also use the capital to grow its mobile network as well as expand the leading share it holds in the mobile market in Australia.

The company divested its mobile phone operations in Hong Kong to HKT in a deal worth $2.4 billion last month. Billionaire Richard Li has a controlling share in HKT, the report said.

The newspaper also said that Telstra's adviser for the deal is Goldman Sachs while the US company is being advised by Gresham, Reuters reported.

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