The Telstra Group Ltd (ASX: TLS) share price is under the spotlight on rumours that the telco may try to buy a large cybersecurity business.
Telstra share price
Acquisition incoming?
According to reporting by the Australian Financial Review, Telstra has previously tried to buy the previously ASX-listed Tesserent, and it has also been “sniffing” around CyberCX.
Telstra is seemingly interested in more services away from the core mobile services, such as artificial intelligence and cloud computing.
The AFR’s Street Talk has reported that Telstra is interested in the business Versent, which is going through a sales process. The deal could reportedly be worth $400 million. So, it shouldn’t be a huge deal for the Telstra share price either way.
What is Versent?
According to the reporting, Versent provides cloud transformation and security products and services. It has grown its revenue on a compound annual growth rate (CAGR) of 35% over the last five years.
The business’ revenue is currently sitting at $150 million and it’s aiming for revenue of $300 million within three years if it can be successful with market share wins and South East Asia expansion. Strong growth could help the Telstra share price.
It has clients like Transurban Group (ASX: TCL), Seek Ltd (ASX: SEK), Colonial First State, other ‘blue chip’ corporates and government organisations.
The reporting also said there’s a lot of potential for its proprietary cloud software, called Stax, which manages Amazon‘s AWS environments.
The marketing document that has been sent to potential investors, including possibly Telstra, said that more big companies are shifting to the cloud, with “more than 85% wanted to be cloud-first by 2025 and 50% had a cloud migration in works. Yet 46% found it hard to find the right pair of hands to make the jump – which is where Versent comes in.”
So, clearly it’s a good business that Telstra should want to be interested in.
How likely is it that Telstra will win?
The telco is a huge business and definitely has the financial firepower to win, but it reportedly faces competition from the likes of two Indian giants of Wipro and HCLTech, as well as other players.
I think this could be a good move by the ASX company – it’d be good to diversify its operations and earnings. I’m sure there will be an update for investors if Telstra is successful.
At the latest Telstra share price of under $4, I’d suggest it’s an opportunistic time to look at the business.
