Retrospective: Telstra Sensis China

Robert Rath, CEO Telstra Sensis China, reflects on the business’s achievements during his three and a half year tenure ship in Beijing as he prepares to return to Australia. Interview and compilation by Sophie Loras.

Robert Rath,
CEO Telstra Sensis, China

Someone once described to me their job in China was explaining the unexplainable to Australia – and I think that’s a large part of the job.

SENSIS ACQUISITIONS

Telstra has had a rep office and an involvement in China for over a decade and has been largely telecommunications focused. It really wasn’t until 2006 when Sensis was looking for growth beyond the domestic market in Australia that it concluded its first deal in China – the majority share of SouFun (China’s largest real-estate and home furnishing and improvement website).

By January 2007, four of us had relocated to China to help integrate, put in the systems and processes financial rigour to really help SouFun from being an entrepreneurial led business to a business that would be ready for IPO.

Having read a lot of books and cultural awareness programmes, they really didn’t cover anything like what you were going to deal with coming to China – for example – Sensis is a sales and marketing organisation so we did sales rideons, sales workshops and brainstorming sessions and came up with a whole series of recommendations. One of the funny things about sales rideons is that in Australia you sit as a silent observer in the meeting and you go and observe the sales process in the customer’s office. In Australia the observer would sit there and not participate in the meeting per se but to sit there and learn. But in China of course, it works differently – you are seen as the senior person and so the sales person hands over to you to run the meeting but of course you only find that out when you are in the meeting and the meeting has already started! So that is an interesting difference between sales culture in China and Australia.

We realised pretty soon – about half way through 2007 – that as attractive an asset SouFun was, it was still pretty small in the overall scheme of things for Telstra and that we were in danger of having the stranded asset type issue where you don’t have enough critical mass to get enough focus and attention and also resources and therefore that asset could actually suffer.
So we started looking at what were the attractive industries to move into? And who were the leading players.

We looked at the usual suspects: Travel; Jobs; Finance; Real estate; Automotive; IT.
 
Our approach in China is you either buy or build your way into the number one position of any of these verticals. Ultimately the economics of the online market is that the winner, or the leader, takes the lion’s share of the profits.

Automotive seemed to be a very attractive market underpinned by solid physical car sales in an emerging market and an emerging second hand car market. And in June 2008 we did our second transaction in China to give us the number one position in automotive in terms of Internet traffic and the number two position in terms of IT selling computers and phones and MP3 players.

By February 2009 we got into the mobile value added services business and that again put us in the number one position in terms of music distribution of mobile phones in China and the largest service provider in terms of content and other applications. A year later we did our fourth transaction in the mobile advertising space giving us the leading position in the mobile advertising space in China. We have got 760 million mobile phone users in China versus 22 million in Australia.

LIGHT TOUCH APPROACH

The way we approached things was to have what we call the ‘light touch” integration approach – so don’t fill these management teams up with Australians who think they know how to run businesses in China because it is very apparent that Chinese know how to run businesses in China and they do that extremely well. Where we could add value was around getting financials in order – so financial systems and processes, such as monthly performance reviews, board meetings, audit and compliance meetings and then also the synergies across things like sales, training, technology.

We have, for example, just launched our first Chinese built website in Australia – Car Showroom. One of our Chinese partner companies did a fantastic job – less time, less money, better quality product. And we have started on a track now where we are increasingly moving to designed and developed in China for products in Australia.

Internet users in China are at 340 million, Australia has 17 million. But in China, that only represents 28 percent penetration. It means it is a fiercely competitive market and innovation and the entrepreneurial drive really does generate a lot of creativity and we think that that kind of energy, and that kind of know how deployed in Australia will help our domestic businesses in Australia enormously.

THE PEOPLE

When we came to China in January 2007 we had four expats and one local hire. We now have a team of around 30 and still only have four expats. Across China, with our joint venture companies we have about 4600 staff – which according to Austrade makes us the largest Australian employer in China.

The leadership of our JV companies are extraordinarily high calibre individuals at CEO and senior management levels who are the essence of Chinese entrepreneurialism but also have a great familiarity with western business practices. And as Telstra looks to Asia for future growth, having access to these very high calibre business leaders is a great addition to the bench strength, or the family, that is Telstra.

SOUFUN – IPO

We came to China on the back of the SouFun deal and subject to market conditions, we are very optimistic we can do an IPO of that business in the not so distant future which is a nice bookend to the China experience for me. The learning and the experience that goes with that has just been enormous and just enhances Telstra’s reputation in China as a good investor, and more importantly, as a good partner.

REGULATION

From a regulatory point of view – the key observation in China is that relationships and networks are really important. China is going through a period of very rapid regulatory reform in all parts of the business whether its travel, whether its telecommunications, whether it’s media. And I think China is working very, very hard and in my opinion doing an extraordinarily good job in quite difficult circumstances of having clarity and transparency in its regulatory environment and that transition is hard.

AUSTRALIA AND CHINA

Australia, as a country, needs to engage much more deeply with China. Our trading partners in the past have been with the UK, Europe, America, Japan, and China is well and truly our major trading partner now and I think Australia has a unique place in China’s economy but also in the minds and hearts of the Chinese people.

When I talk to Australian businesses a lot of them look at China as being a branch office for their Australian operations, and I think that’s the wrong way to look at it. I think China needs to be a major hub for most Australian businesses whether that’s in the services sector, the resources sector, technology or whatever.

I think we need to do more for Australian businesses in China. And from that point of view I am very proud of Telstra’s walking the talk in terms of being able to put significant investments into China.

SENSIS CHINA WEBSITE INVESTMENTS

SouFun – China’s largest real-estate and home furnishing website

IT168 – sells products such as servers and routers

PCPop – Consumer electronics site

Autohome / Che168– Mainstream consumer auto websites

ChinaM – Number one service provider to

China Mobile and China Unicom

Sharp Point – Exclusive operator for China Mobile central music platform
products

LMobile – Leading mobile media service and platform technology provider

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