Tech Deals is a weekly column covering the latest deals in one of the busiest sectors for M&A. To read previous articles go to our Tech Deals page.
Telstra’s media machinations
While Telstra is no doubt keen to play a bigger role in the Australian media sector the extent of the telco’s ambition is keeping plenty of punters guessing. Telstra’s name has been attached to everything from Consolidated Media to the Nine Network but the telco is unlikely to make any hasty moves. As things stand, Telstra has taken itself out of the race to acquire James Packer's $900 million stake in ConsMedia but not before mulling an unlikely partnership with Kerry Stokes’ Seven Group Holdings. James packer might be making the headlines at the moment but the Seven boss is no slouch when it comes to deal making and The Australian Financial Review reports that Seven and Telstra seriously considered teaming up to grab a bigger chunk of Foxtel.
The plan reportedly involved the purchase of debt instruments issued by ConsMedia that could be converted into equity in the company. The rationale of using a convertible debt structure is simple because it would allow both companies to hold an economic interest in ConsMedia without having to take outright ownership. The structure would make Telstra and Seven lenders to ConsMedia and both would have the option to convert their investment into equity at a more opportune time. Whether the plan was good enough to convince the ACCC is now a moot point given that Telstra has dropped the idea, leaving News Limited as the frontrunner. Meanwhile, the telco had also reportedly teamed up with Fairfax Media to have a look at Nine Network, although Fairfax has since walked away.
The thought of Telstra buying Nine makes a great headline but it’s hard to see how this fits into the “selective M&A” strategy that Telstra boss David Thodey has been touting to his shareholders. The thought would also no doubt send the ACCC into conniptions and after putting so much attention into rehabilitating its relationship with the regulator it’s hard to see why Telstra would be willing to take everything back to square one. So this one is going to be a hard sell for Thodey, both to the regulator and shareholders, and a Telstra move on Nine is a case of wishful thinking at best.
AusPost draws first blood
Meanwhile, away from all the media machinations, Telstra has signed on to become the first customer on Australia Post's planned digital mailbox service. The partnership will see AusPost host the service on Telstra’s cloud computing platform and will see Telstra provide the capability to deliver more products and services through the Australia Post IT network. The deal is great news for AusPost which is embroiled in a war of words with Digital Post Australia, which is a joint venture between Salmat, Computershare and the technology provider Zumbox. With the Australian market only expected to have room for one player, the race is on between AusPost and DPA to sign on as many heavyweight customers as possible and AusPost has got the ball rolling on that count.
The race for Optus’ 4G dollar
Staying in the telco sector, with the HFC deal now behind it Optus is now reportedly turning its attention to getting the LTE 4G network up to speed. Optus and Vodafone are naturally trying to catch up to Telstra in the 4G game and The Australian reports that Optus has earmarked $1 billion to get its network up and running.
The interesting question now is who is going to get the chance to rollout the network with the likes of Alcatel Lucent, ZTE, Ericsson, Samsung and Huawei all in the mix. All are worthy applicants, but you can pretty much count out Ericsson and ZTE, both of whom have a strong relationship with Telstra.
Huawei has already been working with Optus on the preliminary testing of its 4G network testing and one would expect that relationship to blossom further. However, The Australian reckons that Samsung and Alactel Lucent could be the dark horses in the process.
Japan’s NEC beefs up in Australia with CSG carve-up
Darwin-based ICT outfit CSG’s beleaguered shareholders finally have some cause to cheer, now that Japan’s NEC has decided to pick up CSG’s technology solutions business for $227.5 million. There is also a further $32.5 million on offer, pending CSG's financial results to June 30, but the chances of those numbers coming in favour of CSG look slim.
Given that the whole process was in a limbo at the start of the year, CSG shareholders will welcome what NEC has on offer and the Japanese giant is obviously happy with its purchase. CSG was thrust into the spotlight in September last year when it told the market it had received a $340 million, $1.20 a share, takeover offer from an un-named suitor, which was rumoured to be NEC. The Japanese suitor was touted as one of the few interested in the whole business, however, NEC Australia's managing director Alan Hyde told Technology Spectator that NEC started discussions to buy the tech solutions division in mid-January this year.
"Since January we have been focussed on the tech solutions business which is a great for what we want to do," he said.
According to Hyde, NEC is on a transformative journey in Australia, moving from a communication-centric business to a more complete end-to-end solutions provider, and the tech solution group’s strong government, large and medium sized enterprise customer base certainly helps.
“I think we are in a unique position in Australia, with a very strong communications capability and now a strong IT capability,” Hyde says.
As for CSG, the focus now will be on the print services business, which is being restructured, and shareholders might be bracing for a bumpy ride.
CSG has lowered its full year earnings guidance by 30 per cent and is reassessing the book carrying value of the Australian print services business,
The restructure exercise is expected to be delivered in two phases with the first phase to deliver annualised cost savings of $13 million by September. The second phase is expected to be implemented by June 2013 and expected to deliver cost savings in excess of $4 million per annum.
“The strategic review identified significant opportunities to leverage business processes across Print Services Australia and Print Services New Zealand. Duplication of some functions will be eliminated and other expenses will be reduced,” the company said in a statement.