Telecommunications giant, Telstra Corporation (ASX: TLS) has been given approval to acquire the True Local directories.
The Australian Consumer and Competition Commission (ACCC) today said that it would not oppose the deal, citing stiff competition from Google. Telstra is buying True Local from News Corporation (ASX: NWS), and will integrate the website into its existing Sensis business, which runs the Yellow and White Pages and the Trading Post.
Telstra shareholders may be wondering where the value is in a business like True Local. As the competition regulator says “The merged firm would likely be strongly constrained by Google and its myriad of products that are increasingly replicating the online business directory listing model.”
Sensis has struggled to compete with Google and other online search services, and its printed Yellow and White Pages products are increasingly seen as irrelevant. Their combined digital revenues are low and growing at a snail’s pace, under intense pressure from Google’s products. Showing how Sensis is a rapidly declining business, revenues fell 16% to $1.5 billion in 2012, following a 6% fall in 2011.
The Trading Post was practically essential before the internet age if you wanted to buy or sell something second hand, but the arrival of EBay and the rise of Carsales.com (ASX: CRZ) and even Fairfax Media Holdings’ (ASX: FXJ) Drive website have virtually killed the Trading Post as a thriving business. Telstra has already seen the writing on the wall and an attempt to sell the Trading Post to Carsales.com was blocked by the ACCC. That will likely see the Trading Post die a lingering death.
While the acquisition of True Local may be an attempt by Telstra to revive its Sensis business, shareholders would probably be hoping that the telco jettisoned Sensis as a whole, and concentrated on its growing industries such as mobile, broadband, Foxtel and cloud and data centre services.
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