Australia’s leading telecom Telstra has sold off 70 percent of its directories unit Sensis to a U.S. based private equity firm for A$454 million, which works out to a valuation of A$649 million (US$591 million). There was speculation in the Australian press in recent days that the deal could go for as much as A$3 billion.

Given the surprisingly low valuation, the sale is generally being interpreted as a decision by Telstra to get Sensis off its books in order to protect its share price. While Sensis remains one of the world’s largest legacy directory businesses, it wasn’t a large part of Telstra. More importantly, it was seen as an old world business within a Telstra trying to position itself as a modern communications technology company.

For the year ending June 20, 2013, Sensis generated EBITDA of A$571 million on revenue of A$1.34 billion, for a 43 percent EBITDA margin.

The decision to shed Sensis may be a wise move for Telstra, but it could also be a potential boon for Platinum Equity. While Sensis does have a print business in rapid decline, it also has digital assets with the potential for growth, plus a large sales force. The opportunity to digitally enable Australian small business remains open.

A recent peer example suggests one model for Platinum to follow.

In 2012, AT&T sold a majority of its YP division to Cerberus Capital Management for a valuation of US$1.8 billion, which was seen at the time as a shockingly low price. Since then, Cerberus has certainly cut costs, but it has also brought in new talent to advance the business forward, particularly on YP’s roughly $1 billion digital business, a third of which is mobile. YP’s recent acquisition of Sense Networks, a mobile ad targeting platform, suggests Cerberus has intentions for YP that go well beyond extracting cash from the business.

On Platinum’s website, the company described its approach as “driving value through honest, intelligent operational improvement rather than financial engineering.”

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The Australian telecom Telstra announced yesterday that Bruce Akhurst, CEO of its Sensis directories unit, has resigned. Akhurst had once been seen as a rising start at Telstra, but his failure to complete the transformation of Sensis from a traditional to a digital media company likely secured his fate. In fairness to Akhurst, his struggles are shared across the global Yellow Pages industry.

Akhurst’s departure comes in the wake of the Sensis’ steady erosion. In the most recently completed half year (ended Dec. 31, 2011), the company saw its revenues fall by 24 percent.

Rick Ellis’ recent arrival at Telstra was likely the first signal that Akhurst was on notice. Telstra CEO David Thodey effectively demoted Akhurst by placing the Sensis business within Ellis’ portfolio. Ellis comes to Telstra from Television New Zealand, where he was CEO.

As Group Managing Director, Digital Media, Ellis will oversee Sensis as well as all of Telstra’s digital media efforts. In addition to Sensis, Telstra owns a 50 percent share in the Australian pay TV company Foxtel. One of Ellis’ major priorities will be Telstra’s plan to invest in a high-quality video streaming platform. Once Akhurst leaves, Ellis will run Sensis on an interim basis while a search is under way for a permanent CEO.

Akhurst has been at Telstra for 15 years, the past seven at the Sensis helm. His tenure at Sensis has been full of highs and lows. He is perhaps best known for bringing in a group of U.S. based Yellow Pages executives led by sales veteran Carol Johnson and committing to a strategy built around growing print revenues. This effort was based on the premise that print had sufficient untapped value to drive growth. The company focused on improved execution and more proof of value in print, and for a time the strategy worked. As late as 2009, the company was still generating print growth. Johnson joined Sensis as COO in 2007 and left in 2009.

The print-centric strategy was ultimately unsustainable,with print turning south in the 2010 financial year. Last year Sensis rolled out a new strategy focused on becoming a digital solutions provider to SMBs. Rapid erosion in its biggest markets, Sydney and Melbourne, has been at the root of Sensis’s recent decline.

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Scanning the global Yellow Pages industry for noteworthy recent developments:

Yell wants its customers to share videos of the “amazing things” that they can do with its economized Yellow Pages directory. The U.K.-based company calls this reformatting of its traditional product “the most significant change” in more than 40 years. Yell is using YouTube and Facebook as contest drivers by asking amateur videographers to submit their entries through these social media platforms. The winner will receive 5,000 pounds.

In Finland, a five-year battle between Eniro and Fonecta over print Yellow Pages supremacy in the Greater Helsinki and Pirkanmaa areas has finally been resolved. Fonecta has purchased Eniro’s telephone directory services, meaning that as of 2011, residents of these areas will no longer receive competing (yet very similar) directories. Online brands will continue to operate separately. The net effect could be higher efficiencies for advertisers, many of which have had to choose marketing in one book or the other.

Eniro Denmark is under new leadership. Mattias Wedar has been named president of Eniro Denmark. Einar Storsul has been named Eniro’s new chief information officer, replacing Wedar. Former Eniro Denmark head Henrik Dyring is now CEO of Eniro’s chief Yellow Pages rival in Denmark, De Gule Sider (a division of European Directories).

Australian directory publisher Sensis will bypass taking part in the auction for the New Zealand Yellow Pages. Sensis was once thought to be a logical strategic buyer for Yellow Pages Group (NZ). Sensis’ owner, the Australian telecom Telstra, apparently sees higher growth potential in China and other Asian markets. YPG-NZ is currently carrying NZ$1.4 billion (about US$996 million at current exchange rates) in senior debt and has depreciated significantly from the NZ$2.2 billion (US$1.6 billion) that was paid by a private equity group to acquire it in 2007. YPG-NZ CEO Bruce Cotterill will give a featured address at BIA/Kelsey’s upcoming DMS ’10 conference in Dallas, TX.

In a recent conversation with BIA/Kelsey, Cotterill said the directory business in New Zealand has performed well through a tough economy, but its loss of value has been largely the result of bad timing. The company’s acquisition by the private equity group occurred at the peak of directory valuations. At DMS, Cotterill plans to describe the efforts YPG-NZ is making to transition the business to digital while continuing to defend print, which accounts for 85 percent of revenues. Cotterill has been especially focused on improving sales efforts. The company is in the process of increasing its sales force by 50 percent, and developing new channels for retaining and upselling smaller accounts, among other initiatives.

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Sensis’ print revenues were down 5.1 percent, reflecting both White and Yellow Pages.  White was basically flat, while Yellow Pages was down more substantially. Metro print revenues are mostly reflected in the first half, while the smaller markets, which perform much better, are mostly recorded in the second half. In general, metro print declines are in the high single digits, while regional book declines are in the low single digits, with some smaller books still growing revenue.

Currently, digital accounts 20 percent of total domestic revenues for Sensis, a ratio that will expand considerably over the next few years. Sensis is investing considerable energy in launching new digital products, particularly as it has completed installation of a new Amdocs publishing system (it has published 101 titles on the new system to date) that enables the company to launch new products from existing content, and with different pricing methods and terms. The new system took three years to install and replaces an older print focused system that gave Sensis little flexibility.

We spoke last night with Sensis CEO Bruce Akhurst and COO Gerry Sutton about the results and new developments at Sensis.

“We are transitioning from the past to the future and we are very bullish about this business,” Akhurst said. He was eager to point out that, while Sensis is seeing  revenue declines, it is gaining intermedia share as the Australian print media market declined by 13.1 percent (8 percent overall) in calendar 2009.

Akhurst wouldn’t go into much detail about new digital products on the horizon. He did say there will be several and they will accelerate the company’s shift to digital. Sensis already has online White and Yellow, a CitySearch local guide, mobile Yellow Pages, an ad supported DA product (Sensis 1234), and a mapping product called WhereIs. The company also has an online ad network called MediaSmart.

When we asked if the company planned to move into a leads-based or pay per call sales model, Sutton replied that Sensis will remain an inclusion based company in the near term, but it is moving aggressively to position itself for leads-based sales, or at least subscription sales backed by detailed reporting. The company currently has about 8,000 customers with about 24,000 metered lines. Sensis expects to increase that into the hundreds of thousands over the next year.

The company says print usage is fairly stable at 25 million uses per week, with about 20 million online references. The biggest growth area is mobile, which has seen an 80 percent usage increase over the past year.

Sensis is no longer touting print as a source of growth. It doesn’t project a reversal of the current trend. The company is rolling out some new innovations in print (mini directories, companions, bundles and so on) aimed at maintaining usage and display volume. However, the publisher’s main message now is on how it is investing and innovating in multiproduct. The company is confident that its large and well training sales force provides an edge against digital competitors. We’ll be anxious to see what new digital offerings Sensis rolls out in the coming months.

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Following a significant court decision, Yellow and White Pages content is not entitled to copyright protection in Australia. Assuming the case is upheld, any entity can legally copy the content from a Sensis directory, even to build a competitive local search or directory product, according to Australian press reports.

The decision is the outcome of a lawsuit filed by Sensis and its parent company, Telstra, against Local Directories, a small independent Australian publisher that used Sensis data in building its product.

The presiding judge argued, in essence, that the effort involved in building the databases didn’t rise to the level of intellectual property worthy of protection.

Sensis also released a statement following the ruling, which said, “This decision raises fundamental issues about the score of copyright law in relation to complex compilations, with far reaching impact beyond the facts of this particular case. Sensis is presently considering its position in relation to an appeal.”

We spoke also on Tuesday with Sensis CEO Bruce Akhurst, who downplayed the impact of the ruling. He pointed out that while the decision was not welcome, it really only clarifies the legality of an already common practice, copying Sensis’s listings data and classification system. He notes out that the content of the actual ads within the Sensis directories is and will continue to be protected under copyright.

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