Telstra bid for Yellow Pages looks likely

Telstra may bid for Telecom's Yellow Pages as part of a plan to increase revenue in its directory businesses.

However, analysts said yesterday that the Australian telecommunications giant would be up against candidates such as Macquarie Bank-funded European Directories and private-equity entities such as New York's Kohlberg Kravis Roberts as well as other international parties.

Merrill Lynch analyst Patrick Russel said in Melbourne that Telstra would be a strong candidate to bid for the Yellow Pages Group, which includes the Yellow and White Pages online and in book form.

"Telstra is committed to the directory business and views the sector as a growth opportunity and an engine to drive online."

Telstra did not want to comment on a potential offer.

Russel said Telstra ran Sensis, its directory business in Australia, particularly well.

Telecom said last week that it was examining options for its Yellow Pages business, including a partial or full sale, or a public float. It may also keep the business.

Analysts believed the Yellow Pages would fetch $1.6 billion to $2.2 billion. Citigroup is acting as an adviser for Telecom New Zealand in the process.

Russel said Telstra would look at how it could leverage underdeveloped services in New Zealand using the Yellow Pages platform, such as accommodation and food.

"Directory businesses are polarising telcos around the world between the ones who see a bigger threat from online players ... and others who want to integrate the business into their content applications."

The Telstra board approved a bid for the Telecom directories business at the end of last year.

Telecom chief financial officer Marko Bogoeivski said recent transactions concerning other directories businesses internationally suggested that a sale could deliver significant value to the group.

Telecom was also looking into partnering with a global online search player.

Telecom already had a long-standing commercial re-lationship with Microsoft's Xtra internet business.

"In all circumstances, we would intend to maintain a close relationship with the Yellow Pages Group to access their enhanced search information."

The company expected to make an announcement by late next month on the results of the scoping study and intended to update the market at the first-quarter results in November.

Shares in Telecom rose 9c to $4.18 yesterday.

Meanwhile, Telstra said yesterday that it had paid US$254 million for a 51 per cent share in SouFun Holdings, China's number one real-estate and home furnishings website.