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What Telstra Corporation Ltd’s purchase of Ooyala means for shareholders

Australia’s largest telco, Telstra Corporation Ltd (ASX: TLS) has announced the purchase of the remaining shares in streaming media company Ooyala that it didn’t already own.

“Ooyala enables broadcaster, operators and media organisations to deliver digital TV and video content, across any device, using analytics to provide recommendations, personalised content and advertising to the end user”, according to Telstra chief David Thodey.

Telstra is spending US$270 million to take its ownership of Ooyala from 23% to 98%, as the telco moves away from providing ‘dumb’ digital plumbing to households and businesses, into a global content and streaming company.

The telco already owns 50% of pay TV operator Foxtel, with the other half owned by Rupert Murdoch’s News Corporation (ASX: NWS). Foxtel is rolling out video on demand through Foxtel Go, Foxtel Play and Foxtel on Demand.

Telstra is becoming more like a technology company, playing in the realm of huge competitors like Google and Facebook. Telstra’s Ooyala is likely to compete head-to-head against Google’s YouTube, but could also butt heads against Australia’s traditional media players such as Seven West Media Limited (ASX: SWM), Nine Entertainment Co Holdings Ltd (ASX: NEC) , Ten Network Holdings Limited (ASX: TEN) and perhaps even companies like Fairfax Media Holdings Ltd (ASX: FXJ).

Under boss David Thodey, Telstra has expanded into e-health, start-ups, digital media, file sharing, global applications and platforms and still retains a 66% in China’s largest car sales website Autohome, which is currently worth around US$4 billion.

Not all of these ventures will be successful, but it only takes one of these to make its investments worthwhile.

Will Ooyala be it?

That remains to be seen, but it should be viewed as a positive step by the telco to diversify its revenue stream, and overall, good news for shareholders.

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

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