Telstra acquires enterprise network and security integrator

Australian operator Telstra has acquired Melbourne-based enterprise network and security integrator O2 Networks (no relation to the Telefónica owned operator). The acquisition was made to bolster Telstra’s network application and services (NAS) portfolio, as the continues to pursue opportunities in the enterprise space.

According to national newspaper The Australian, the deal is reported to be worth A$60m (US$52.9m).

The operator said its NAS division provides enterprise customers with managed services such as cloud, security and communications. O2 Networks has designed, implemented and managed networks for financial institutions and government owned enterprises in Australia. It has over 100 staff, all of whom will be transferred to Telstra, and 370 enterprise customers including Medibank Private, News Limited and Telstra itself.

The acquisition is already completed as it was not subject to Australian Competition and Consumer Commission (ACCC) approval and follows Telstra’s acquisition in August 2013 of NSC Group, an integrator of unified communications and contact centre technology. The deal was widely reported to be worth A$100m and was aimed to boost its network and applications and services division.

“As our customers shift towards cloud-based environments, they increasingly require capabilities to securely integrate networks, datacentres and cloud-based applications,” said Telstra’s NAS executive director Michelle Bendschneider.

“O2 significantly enhances this capability within Telstra’s NAS portfolio and this acquisition is consistent with our strategy of providing advanced network-based services that are highly valued by our customers.”

Telstra said that its NAS portfolio increased revenue by 17.7 per cent year on year in the year ended June 30th, 2013. During the year, the operator commenced a A$1.1bn six-year contract with the Australian Department of Defence, and signed international deals with airline Jetstar Airways and gym chain Fitness First.

Evan Kirchheimer, practice leader for enterprise telecoms at research firm Ovum, said that the deal will primarily boost Telstra’s Enterprise and Government business unit. In August 2013, the operator announced this division recorded over A$4.3bn in revenue in the 12 months prior.

“My sense is that even though Telstra has been and remains in a strong position as the Australian market leader, that the premiums charged for data network and IP services are being eroded, and even in the mobile domain, where the top two Australian players have over 80 per cent of the business market share, players price to maintain and win share.”

He added that this means that Telstra is increasingly becoming reliant on its NAS portfolio to stimulate growth.

“It strikes me that O2 would fit well with this strategy. Telstra gains solutions and – most importantly – staff expertise in enterprise mobility and security,” he added.

In December 2013, Telstra signed an agreement to sell its majority stake in Hong Kong based mobile business, CSL, to HKT Limited for $2.425bn. Then, in January 2014, the operator announced the sale of a 70 per cent stake in its directories business Sensis to US private equity firm Platinum Equity for A$454m, retaining the remaining 30 per cent stake.

Telstra is not the only operator to have recently invested in network security solutions, French operator Orange’s Business Services division announced in January a deal to acquire cybersecurity firm Atheos, while in August 2013, Japan’s NTT acquired managed security services provider Solutionary.

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