Sensis' biggest internet casualty

Bruce Akhurst did an admirable job of keeping Telstra's directories business afloat amid turbulent times but in the end it was too little too late.

Business Spectator

Bruce Akhurst was one of the great survivors during a brutal period at Telstra, maintaining a level of independence and respect through the series of regime changes that occurred after he joined the group in 1996. Ultimately, however, he has been another casualty of the impact of the internet on legacy business models.

Akhurst survived seven years as chief executive of the Sensis directories business, including the traumatic Sol Trujillo era, because he delivered.

That was no mean achievement. Sensis held its ground for years after similar directories businesses elsewhere imploded as their advertising revenues moved online. Unlike his decimated peers, Akhurst was able to maintain his traditional revenue base even as he took the Yellow Pages directories and the wider 130-year-old Sensis business online.

It was the ability of Sensis, under Akhurst, to apparently defy gravity that helped shield him from the continual overhauls of senior Telstra management that have occurred since its markets were opened to competition and its privatisations process started in 1997.

Last year, however, gravity prevailed. Last March Akhurst unveiled a quite radical change to Sensis’ strategies; an attempted reinvention of a traditional directories business selling advertising into a digital marketing and advertising agency.

Until then Akhurst had been pursuing a carefully-controlled incremental change strategy aimed at protecting the group’s $2 billion a year of revenues even as it edged into the digital space, which accounted for about 20 per cent of those revenues.

His hand was forced when, in announcing its first half results last February, Telstra disclosed a shocking 18 per cent fall in Yellow Pages revenue. Plan B, which had been sitting on the shelf awaiting the moment, was dusted off.

Unhappily, as it transpired, Sensis underestimated the degree of difficulty associated with the change program. At its full-year results, Telstra revealed Sensis revenues had fallen 24.1 per cent and earnings before interest, tax, depreciation and amortisation 54.9 per cent.

David Thodey’s response was to announce a complete restructuring of Telstra’s digital media businesses – including Sensis – and the appointment of former TVNZ chief executive Rick Ellis to lead them. Akhurst, who had previously reported directly to Thodey and was the longest-serving of the senior executive team (excepting departing chief financial officer John Stanhope) would now report via Ellis.

The writing was one the wall and today Telstra announced that Akhurst would leave in May, essentially completing the overhaul of Telstra’s most senior management.

With hindsight, Sensis waited marginally too long to push the button on its Plan B to respond to the digital world and underestimated the execution risk involved when it did, but Akhurst’s contribution to the group and the achievement of Sensis during his tenure in holding its legacy revenues, margins and cash flows for as long as it did shouldn’t be underestimated or downplayed.

The dam has broken and the jury is still out on whether the Sensis strategy can be transformed from what was one of principally selling advertising to small and medium-sized business customers to one where it sells them business leads. That isn’t an easy transition to make, requiring both a very different approach to sales and a re-education and convincing of the vast Sensis customer base that the new proposition is of value.

It is a transition, even if successful, that would shift the business from a high-yield environment in which it had a near monopoly for a very long time to one which is low-yield – and in which it competes with a range of new competitors, including behemoths like Google, within an environment where there are cyclical pressures overlaying the immense structural change in its sector.

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