Telstra pays discounted price for Keycorp

MELBOURNE - Australia's biggest phone company, Telstra, says it will pay 17 per cent less for a controlling stake in Keycorp following recent share price falls in technology stocks globally.

Telstra will now pay $A426 million ($221 million) for 51 per cent of the Sydney software provider.

On July 21, when the agreement was first announced, Telstra said it would pay $A515 million.

Telstra, which is investing in internet businesses to offset increasing competition in its traditional phone business, will now pay $A11 a share for 38.7 million ordinary shares in KeyCorp. It had planned to pay $A13.30 a share.

Telstra handles half of Australia's electronic payments, or more than 1 billion transactions a day, mainly credit card payments at shops.

Merging with Sydney's KeyCorp, which designs software and terminals to process payments, would help it to expand on the internet and overseas and tap the world's $4.3 trillion electronic payments market.

The repricing follows a 42 per cent fall in Keycorp's share price to $A8.72. The US Nasdaq market has fallen more than 37 per cent since its high on March 10.

The repricing reflects "recent valuation re-ratings of telecommunications and technology companies and assets globally," Keycorp and Telstra said in a joint statement.

Keycorp plans to buy Commonwealth Bank of Australia's 50 per cent interest in Electronic Financial Technologies, a payments technology joint venture established in 1995 by the two companies. Keycorp will pay $A6 million for the stake, including 220,055 Keycorp shares at $A11 a share.

Telstra's share price closed down 14c yesterday at $A6.25.