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Telstra Acquires Majority Stake Two Leading Chinese Online Advertising Businesses

Telstra today acquired 55 per cent of two Chinese internet businesses with leading positions in the fast-growing online auto and digital device advertising sectors.

Telstra acquired the controlling stakes in the two businesses, Norstar Media and Autohome/PCPop, for an undisclosed amount. Both businesses are cash-flow positive.

Norstar, founded by Chairman Mr Lan Jiang, operates the popular auto site Che168.com and leading digital device site IT168.com. Autohome/PCPop, founded by successful young Chinese entrepreneur Mr Li Xiang, operates the leading auto site Autohome.com.cn and popular digital device site PCPop.com.

Combined with the 2006 acquisition of a 51 per cent stake in China's number one real estate site, SouFun, the majority stakes in the auto and digital device sites give Telstra a strong strategic position in the internet advertising market of the world's most populous nation. Together, the sites deliver the second largest user traffic in the digital device segment and the largest user traffic in the specialist auto segment, complementing SouFun's leading position in real estate.

Telstra CEO Sol Trujillo said the acquisitions were consistent with Telstra's strategy of creating a media-comms footprint in Australia and internationally.

"Telstra now owns majority interests in three of the leading Chinese companies operating in the three key online advertising industry segments: real estate, auto and digital devices," Mr Trujillo said. "Combined with our majority stake in China's number-one real estate website, SouFun.com, these acquisitions provide further high-growth opportunities for our buy, find and sell business, Sensis."

While the price paid by Telstra was not disclosed, Mr Trujillo said the acquisitions cost "less than half what we paid for 51 per cent of SouFun in 2006".

Online advertising revenues in the Chinese auto segment are predicted to almost triple by 2012, rising from US$230 million this year to more than US$690 million in 2012. New car sales in China are already almost half that of the United States, with 7.2 million cars sold this year. China is expected to overtake the United States as the world's largest auto market in the next decade.

The online digital device advertising market is expected to triple by 2012 - up from about US$235 million this year to US$700 million. Last year, 48 per cent of the Chinese population had access to a digital device. By 2015, that percentage is predicted to increase to 84.5 per cent, or 1.18 billion people, with sales totalling almost US$280 billion annually.

Sensis CEO Bruce Akhurst said: "These acquisitions allow Sensis to continue to leverage core capabilities and technology in a larger, faster-growing and less mature market than Australia, and in partnership with high performing and experienced local management.

"We will devote resources to delivering the highest quality content in the different segments, build a strong sales force to monetise traffic, invest in the brands to build awareness and continue to drive revenue while improving margins. Our goal for the merged business is a leading position in traffic and revenue market share to ensure continued strong growth."

Norstar's founder and chairman, Lan Jiang, said Telstra's involvement gave him great confidence in the future of his websites. "Telstra brings a strategic vision, world-class technology and a results-driven management philosophy, exactly what we need to become an even more successful company."

The founder of PCPop and Autohome, Li Xiang, said he is very excited with the opportunity to work with Telstra to build a great internet business. "We already offer a terrific user experience. Telstra's extensive experience and resources will give our team an improved innovation capacity to best serve our users and customers."

All four Chinese websites under the new Telstra ownership are consumer focussed. The auto websites providing detailed information about all aspects of buying a car. The digital device sites focus on products such as computers and cameras. All four sites provide advertising and listing services for manufacturers, retailers and dealers in these products. The businesses generate revenue primarily through online display advertising and product listing fees.

The two internet businesses have been legally merged following Telstra's acquisition, with operational integration to occur over the next year to capitalise on core strengths and synergies.The current executive teams at both Norstar and Autohome/PCPop will maintain key roles in the merged business. /PR

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