Telstra Corporation Ltd (ASX: TLS) boss David Thodey has announced that he wants at least a third of the company’s revenues to come from offshore by 2020.
Speaking to the Australian Financial Review (AFR), Mr Thodey says it’s a ‘reality the company has to face’. With growth in Australia likely to be hard to come by, many Australian companies have looked to Asia to generate growth, including bank Australia and New Zealand Banking Group (ASX: ANZ), Insurance Australia Group Limited (ASX: IAG) and Carsales.com Ltd (ASX: CRZ).
But the issue for investors is that Australian companies expanding offshore have had mixed success, with quite a few blowing up millions in shareholder value in the quest for greater growth. Insurance Australia Group’s disastrous move into the UK and National Australia Bank’s (ASX: NAB) expansion into the US and the UK are two high profile examples.
Telstra’s international division currently accounts for around 3% of the giant telcos revenues, and Telstra has recently sold out of some of its Asian businesses. Hong Kong mobile operator CSL was sold this year for US$2.4 billion and a part sale of its Chinese vehicle website Autohome, through a listing on the New York Stock Exchange.
Interestingly, it was former CEO Sol Trujillo who devised the company’s Asian strategy, making several acquisitions, including CSL, Autohome and property website SouFun, which led to $1 billion of writedowns.
In October last year, Telstra global president Martijn Blanken told the AFR that the company was preparing to comete against giant US Telcos in Asia for services such as cloud computing, video conferencing and internet services.
With Telstra struggling to generate strong growth in revenues in Australia, the telco really has little choice but to look offshore. As a shareholder, I’ll be hoping the company takes baby steps, rather than taking on the risk of a big acquisition blowing up. If you want further insight into Telstra, the following report is a must read.