Telstra has bought a 51% stake in Chinese online real estate and home improvement group SouFun Holdings for $254 million, a move that give the Australian company access to China's booming property market.
'With this one acquisition, we have established ourselves as the undisputed market leader in the high growth online Chinese real estate market,' Telstra CEO Solomon Trujillo said. 'We have opened a gateway to the racing Chinese online advertising market.'
The acquisition, which comes less than a week after Canberra confirmed it will sell an A$8 billion ($6 billion) stake in Telstra, is expected to be earnings per share positive after three years, and will add to cashflows immediately.
The acquisition will be folded into Telstra's Sensis advertising and directories business, which is seen as a future growth driver amid declining earnings at Telstra's fixed phone line business and tough competition in the mobile and broadband markets.
'Chinese real estate sales already represented 7% of China 's GDP in 2005. The market is forecast to grow 21% on a compound average growth rate to be worth $438 billion by 2010,' Trujillo said.
SouFun, which attracts more than 40 million visitors each month and is ranked in the top 100 most visited Web sites globally, is expected to show near-triple digit revenue growth, and plans to expand to 100 Chinese cities by the end of 2008 from the 40 it currently covers, Trujillo said.
Telstra expects SouFun, its first acquisition in mainland China , to add around A$52 million ($40 million) to revenue for the year to June, 2007, with earnings before interest, tax, depreciation and amortization of A$18 million ($14 million).