Japanese telco giant lobbies Telstra for partnership

Japan’s biggest telecommunications player NTT is lobbying Telstra to become its biggest partner in a push to become a dominant player in Asia.

Telstra chief executive David Thodey has set Telstra the ambitious goal of reaping around 33 per cent of its net profit and revenues from Asia by 2020 onwards compared to the 3 per cent it currently stands at. Analysts believe this can only be achieved with major acquisitions or partnerships.

NTT Communications ICT chief executive Monte Davis told Fairfax Media that partnering with the Japanese giant was one of the only ways Mr Thodey could achieve his goal due to the lack of takeover options.

His comments come as Japanese Prime Minister Shinzo Abe leads a major trade and diplomatic delegation to Australia on Monday.

NTT is Japan’s version of Telstra – a former government-owned monopoly that is one of the world’s largest telcos with more than 200,000 employees and a market capitalisation of more than $75 billion.

“We have a relationship with the board level with Telstra and I’m trying to sit down with David Thodey specifically to talk about its Asia Pacific plans and how we can work together,” he said. “Telstra seems to be saying it wants to grow and expand with Australian companies overseas and that was NTT’s entire global strategy years ago.

“As long as that’s the model they’re going on it’s fairly easy to leverage the NTT assets, connecting them to Telstra assets and delivering a regional and more global service.”

This could see Telstra connect customers to its networks while using NTT’s data centres around the world, which in turn would cut down on the money Telstra needed to splurge on building and buying assets in Asia.

Telstra has already begun with incumbent telcos in Asian markets. It signed a contract with Telkom Indonesia in January to sell its services in a deal that would see both companies share the resulting profits.

While Telstra could choose to spend billions of dollars buying technology providers and mobile operators throughout Asia, Mr Davis said it was a competitive market where the established players like NTT and Optus-owner SingTel are expanding.

“A strategic partnership with a player that has significant assets in the region is probably the best way for a Telstra to reach that critical mass in that kind of time frame,” he said. “If you’re doing it in a 15-year period then you can build and acquire … because the [established companies] are fairly consolidated players and they’re doing just fine financially and there aren’t many distressed assets.”

Ovum research director David Kennedy said a partnership between NTT and Telstra could be very successful but it was all dependent on the fine print.

“NTT has assets in the Asian region [and] they’ve got a pretty good reputation in Asia but they’re strongest in Japan,” he said. “Regional partnerships are what they’re doing now and it would come down to details like how much access Telstra would have to the Japanese market because that’s what they’d be most interested in.

“If they’re going head to head in many of these markets then you wouldn’t think there are many prospects of a partnership emerging.”

Mr Kennedy said the smarter move for Telstra would be to court Chinese telecommunications giants, which are trying to work out how to expand out of China.

“The only people who I think would be interested in an overarching partnership are companies that don’t have an established position in the region and want one,” he said. “What comes to mind there are players like China Telecom.

“But the other players like BT and AT&T have their own offers and have been in the region for a long time so they’re not really looking for partnerships.”

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