The Motley Fool

Should you be worried by Telstra Corporation Ltd’s Asia plans?

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 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.

NEW. The Motley Fool AU Releases Five Cheap and Good Stocks to Buy for 2020 and beyond!….

Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading over 40% off it's high, all while offering a fully franked dividend yield over 3%...

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.


Motley Fool writer/analyst Mike King owns shares in Telstra and You can follow Mike on Twitter @TMFKinga