The sinking Telstra ship may have found new moorings in Southeast Asia. With share prices hitting rock bottom and investor trust waning in Australia, Telstra has invested A$300 million in 45 technology companies in Asia. By tapping into the largest markets in the world, Telstra hopes to strengthen revenue and recover business lost to NBN.
Telstra Ventures – Telstra’s global funding arm
Telstra Ventures Group is the Telstra subsidiary that identifies, embraces and engages with entrepreneurial companies around the globe. It supports leading edge technology and solutions, providing startups the expertise and market channels needed to leverage Telstra assets. The partnership aims to provide better digital solutions to Telstra customers while increasing the capabilities of new businesses.
Telstra Ventures has formed multiple new partnerships in South East Asia over the past financial year. Some of these include:
- C88 Financial technologies, an online service that connects customers to banks and insurers in Asia.
- Monk’s Hill Ventures, a venture capital firm that invests in technology start ups in SouthEast Asia.
- Gorilla Technology Group, a video analytics firm based in Taiwan that provides market analysis data for security, education, business intelligence and broadcast media.
- Qiniu, a leading cloud based storage solutions provider, that offers data hosting and processing for enterprises across Asia.
- Hypereal, a leading Chinese augmented reality company that offers a complete Virtual reality hardware and content solution within China.
- PT Metra, a digital marketing company, to tap opportunities within Indonesia.
Mutually Beneficial Relationships
While $300 million is not a huge amount from Telstra’s perspective, it is interesting to note that the company has already earned back $200 million from its Asian investments. Telstra seems to be testing the market, and the results look good. The telco giant is not only earning from products and services in Asia but is also benefiting from them internally. It has adopted technologies from companies like DocuSign, Matrixx, Near, Panviva, and Zimperium – for example, Near helped Telstra track customer behaviour within physical stores. This analysis helped Telstra to advertise more efficiently, improving the effectiveness of their message on the ground.
At the same time, startups are benefitting too. Asia is the breeding ground for innovation, with US$2.2 billion in seed funding flowing into this region in 2016 alone. Telstra wants to accelerate this innovation further by providing financial support, domain expertise, and leadership support. By stimulating talent and healthy competition, Telstra wants to encourage long-term success for companies in the region.
Early entry in an immature market
Listed markets like NASDAQ or Australia’s ASX are more mature compared to the markets in South East Asia. Singapore Exchange is maturing but needs more liquidity and investor education before it can become a prime market for regional tech firms looking to go public. This situation increases investor risk, and IPOs are relatively rare in the region.
By entering and investing early on, Telstra wants to secure a foothold before other global giants step in. Mergers and Acquisitions are a growing trend, and having a few innovative tech start ups under it could help Telstra achieve the image-makeover it wants – from Australian telecommunication provider to Global technology firm.
Mitigating risk with due diligence
Telstra wants to proceed surely but slowly in the SEA markets. It has strict criteria for which businesses it invests in. These include companies that are:
- A good fit with Telstra’s overall business strategy
- Mature with established leadership and planning to scale.
- Led by entrepreneurs with the drive and ability to build a global technology company.
- Targeting large, attractive and growing markets.
- Possess revolutionary technology, product or service with a clear competitive advantage.
- Have the ability to provide genuine commercial value beyond funding.
Shareholders remain cautious
While Telstra continues its push into Asia, investors are understandably cautious. Telstra recently spent US$697 million for submarine cable network Pacnet but backed out on a US$1 billion deal with Philippines telco San Miguel. The initial plan of expanding wireless opportunities in the island country ran into hot water due to an inability for both companies to reach the right risk-reward balance.
Investors are worried that Telstra may throw caution to the wind to strengthen Asian ventures and restore Australian losses.