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NTT Reaches Out to Telstra

Robert Clark
News Analysis
Robert Clark
7/10/2014
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NTT Communications, the offshore arm of Japan's largest telecom group, has made a public pitch to become Telstra's prime Asian partner.

Monte Davis, the Australian CEO of NTT Communications Corp. (NYSE: NTT)'s ICT Solutions unit, has said the company could provide Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) with the infrastructure and solutions to help it support Australian companies expanding abroad.

Telstra boss David Thodey has set an ambitious target of increasing his company's offshore business from 3% of sales to a third of all revenue by 2020. This year, it sold off its sole operator asset, the Hong Kong cellco Hong Kong CSL Ltd. , and now its focus is on the cloud and business services. (See CSL Sale Sparks Hong Kong Speculation.)

"A strategic partnership with a player that has significant assets in the region is probably the best way for Telstra to reach that critical mass in that kind of time frame," Davis told the Australian Financial Review.

His remarks came as Japan's prime minister, Shinzo Abe, was visiting Australia and New Zealand. Following Japan's lifting of the postwar ban on offshore military activity, the trip is a sensitive one -- that is, sensitive to China, which has engaged in a war of words with Japan over disputed territory and World War II, and which suspects the US of planning an anti-China alliance.

A co-location deal doesn't normally offer political pitfalls, but this is one Thodey might best make quietly. For instance, he might not want to make it while toasting Prime Minister Abe with a glass of warm sake under a Japanese flag.

Telstra is still 17% owned by the Australian government and is seen across the Asia-Pacific region as the country's flagship telco, so this requires some observance of diplomatic niceties.

Davis might also wish to heed some niceties, too. He seems to be dissing the Aussie telco in suggesting, as he did, that it is merely plodding in the footsteps of NTT Com. On the positive side, he said it should be "fairly easy to leverage the NTT assets, connecting them to Telstra assets and delivering a regional and more global service."

A spokesperson for NTT Com told Light Reading it was "engaging with Telstra" on a "number of areas of collaboration globally," though discussions were still at an early stage.

— Robert Clark, contributing editor, special to Light Reading

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