RealTime IT News

Fairfax/Telstra To Be Australia's AOL/Time Warner?

Speculation surrounding the online strategy of newspaper publisher John Fairfax Ltd has come to a head with a front-page story in one of its own publications stating that it was about to enter a deal with Telstra.

The Australian Financial Review story included claims that Fairfax was negotiating to buy Pacific Access, a wholly owned subsidiary of Telstra, in return for a stake in the ASX-listed Fairfax which would total as much as 10 per cent. Pacific Access runs the White Pages and Yellow Pages telephone directories, both in print and Web form, at a substantial profit.

Morgan Stanley Dean Witter was named in the AFR story as the investment bank which was handling the transaction. No financial details were given on the alleged deal, nor did any executives comment to the AFR.

Fairfax issued a statement to the ASX on Tuesday, saying that it was engaged in talks with a number of companies, "including Telstra".

While the deal would be nowhere near the size of the recent America On Line-Time Wanrer merger, with dollar amounts of AUS$400 million (US$270 million) being discussed, there are some parallels between the business drivers for both of them.

Like AOL in the U.S., Telstra has significant control over cable access in Australia, and Fairfax has been eager to enter the new media world of datacasting for some time now. Fairfax's Internet efforts have been more successful that Time Warner's, but Pacific Access owns two of the most popular sites in Australia, with White Pages being number one on several site rankings.

One potential regulatory snag could be Fairfax's ownership of BIG Colour Pages, which is Pacific Access's only competitor in the telephone directory market. Analysts have also pointed out that Telstra would lose synergies between its telephony business and the directories if it gave up Pacific Access.