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Big buys on the cards as Telstra shifts its focus to Asia

The Age logo The Age 22/05/2014 Anne Hyland and David Ramli
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Telstra chief executive David Thodey has embarked on a major repositioning of the company towards Asia, stating he wants one-third of the company's profits to come from overseas in the next five years and that big acquisitions are an option.

Marking his fifth anniversary as CEO, Mr Thodey laid out his growth plan for Telstra and quashed speculation he would be leaving the company.

"I would like to think at least a third of our revenues and profits came from offshore by some period out to 2020 and beyond. That's a reality that the company has got to face."

It is the first time Mr Thodey has provided such a target for Telstra's offshore aspirations, which are primarily focused in Asia.

In the 2013 financial year, Telstra's international division made $385 million in earnings before interest, taxation, depreciation and amortisation with about $287 million of this generated by the now-sold Hong Kong mobile operator CSL.

Mr Thodey said it was time for Telstra to enter "a whole new growth period" to position it as a global technology company.

This may unnerve some investors. It signals a return of Telstra to the days when it was led by Ziggy Switkowski and the company embarked on a big expansion into Asia, which resulted in the company writing down $1 billion on those investments.

Acquisitions would only be done if they could be proved better than returning funds to shareholders, he said. "We think there's the opportunity to do that." He would not rule out a "big bet" acquisition.

"It's got to be an option we look at. However, I'm acutely conscious this industry has literally lost trillions of dollars in grandiose investments that have not delivered to shareholders."

Matt Williams, head of equities at Perpetual Investments, said "the big bang acquisitions that happened in Ziggy's time didn't really work out that well".

"I don't think shareholders would be against incremental offshore investment just not big bets. They could do that plus do some kind of capital management."

Acquisitions or investments would focus on enterprise services, e-health, digital media and also mobile. "We're trying to lay foundations around new businesses that can go global," said Mr Thodey. "It will take time."

In a sign of the shifting direction at the company, Mr Thodey said staff and investors had to think of Telstra as a technology company rather than a telecommunications one.

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