TELSTRA's attempt to sell the remainder of its information technology services group, Kaz, has stalled because it could not agree on a price with prospective buyer Fujitsu Australia.
It is understood the two groups were up to $90 million apart on the price, with Telstra wanting close to $190 million and the buyer offering only $100 million.
Fujistu's bid had been pushed along by chairman Ted Pretty, who was involved with the original $333 million deal to buy Kaz in 2004 when he was senior Telstra executive, and who is familiar with the remaining operations of the business.
The group was also understood to be interested in parts of the struggling small business telecommunications company, Commander.
Fujistu's failure to complete the deal has left the door open for rival IT services group CSC, which looked at Kaz last year before walking away.
A Telstra spokesman refused to comment on whether the negotiations had fallen through with Fujitsu or what it was planning for the business.
CSC Australia declined to comment on whether it was again interested in Kaz.
A Fujitsu spokeswoman said it did not comment on speculation.
Telstra had engaged with a number of multinational services companies over several months in an effort to offload its troubled services arm, according to industry sources.
However, Fujitsu was the only serious bidder to emerge from this process. It began negotiations with Telstra earlier this year to purchase the remainder of Kaz.
The telco acquired the business for $333 million in 2004, and has realised about $230 million from slicing off parts it over the past couple of years, including $215 million when it sold superannuation processing subsidiary AAS in 2006.
Telstra's spokesman wouldn't disclose the value of the remaining Kaz business but it is believed to have about $180 million sitting on its balance sheet.
Price was always the sticking point between the two parties, with the telco demanding much more than Fujitsu was prepared to pay.
"You get the feeling the business is not profitable, otherwise the deal would have been done," a source close to the deal said a couple of weeks ago.
"An offer of $100 million would stack up pretty quickly because it's not very big for the likes of Fujitsu."
While Telstra has been busy carving up Kaz and selling it off piecemeal, one of the key remaining assets is Aspect Computing, the group's government division.
Fujitsu was interested in controlling this piece of Kaz as part of efforts to bolster its Canberra presence, a source familiar with the negotiations said.
"The Aspect Consulting business is very large in Canberra. Fujitsu would be interested in increasing its footprint in Canberra through the old Aspect business, and it must be looking at the original Kaz outsourcing business," the source said.
The multinational would take advantage of the asset when the time came to bid on big-ticket federal government outsourcing projects coming up for tender in the next year.
During 2007, Telstra conducted a lengthy review of its Kaz business and chief executive Sol Trujillo made it clear the business was not considered core for the company.
Early last year, Telstra removed responsibility for its big-four accounts from Kaz: NAB, Woolworths, Westpac and Qantas. These are now managed by Telstra's enterprise and government group.
"What is there left to sell?," one person familiar with the business queried.
The shift coincided with the jobs of 650 Kaz staff being moved within Telstra.
AAP 15 March, 2008
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