Telstra share price falls despite $270m cloud acquisition

What is Telstra acquiring and why? Let's take a look!

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The Telstra Group Ltd (ASX: TLS) share price is edging lower on Wednesday morning.

At the time of writing, the telco giant's shares are down 0.5% to $3.85.

Why is the Telstra share price falling?

Investors have been selling Telstra's shares this morning despite it announcing a deal to acquire Versent.

This deal may not come as a surprise to readers given that the telco confirmed last month that it was running the rule over the technology consultancy business.

According to the release, Telstra has agreed to pay $267.5 million for Versent, which is well short of the $400 million price tag that was being speculated.

Management expects the addition of Versent to help scale its Telstra Purple tech services business, drive NAS growth, and support the digitisation of businesses and Australian industry.

What is Versent?

Versent is a technology consultancy business that specialises in designing, building, and operating cloud-native applications, data streams, platforms, and services from its offices across Australia, Singapore, and the United States.

It reported $130 million net revenue in FY 2023, representing a strong 17% compound annual growth rate between FY 2020 and FY 2023.

Its team of more than 500 experts work with over 40% of the ASX 100 to transform their businesses through cloud technology, offering both professional and managed services, and key partnerships with AWS, Microsoft, and leading security and data vendors.

Telstra highlights that the acquisition also includes Stax, a subsidiary of Versent that provides a self-serve cloud management platform for enterprise and mid-market customers which enables them to design, build and run their own cloud.

Why is it acquiring Versent?

Telstra Enterprise Group Executive, David Burns, explained the rationale for the deal. He said:

Since launching our Telstra Purple technology services business four years ago, we've seen growing demand for technology solutions – particularly in cyber security and cloud-led transformation – as enterprises, governments and whole industries continue to digitise their operations.

Through the combination of our global partnerships, breadth of our networks and technology, and strength of our deep-domain experts, we have never been better set up to deliver secure, large-scale transformation through technology. Versent will bring additional depth to our strong team of experts, help our enterprise customers maximise their investment in cloud-led transformations, and help us meet the growing demand for these specialised services.

Telstra expects the deal to complete within the next six weeks. However, it remains subject to various conditions being met, including certain security holder processes.

The Telstra share price is now down 10% over the last six months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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