Telstra acquires $40m network integrator

Telstra has acquired O2 Networks as it continues to bolster its growing network application services (NAS) division.

Under a deal announced today, Telstra will take on all of O2 Networks' 100 staff. The company designs and manages networks for large financial and government-owned clients. The company has 370 customers.

The moves "significantly enhances" Telstra's ability to provide network, data centre and cloud services, according to a press release.

"Our core capability has been in run and operate," said Telstra’s NAS executive director Michelle Bendschneider.

"We recognised we wanted to get into front end of customer engagement, where customers go to market, try to make sense of emerging technology. And to that, do consulting, not just run and manage."

The O2 acquisition follows Telstra's buyout of NSC Group last year. Bendschneider said that while the two companies bring different expertise – O2 specialising in management of network security and NSC in unified communications – she said both have a "strong capability in that upfront customer engagement cycle".

"We are adopting same approach we had with NSC, which was very successful; we have not lost a single client."

Telstra's NAS portfolio grew 17.7 percent for the year ended 30 June. Contracts include its $1.1 billion contract with the Department of Defence as well as deals with Jetstar and Fitness First.

O2 Networks' competitors include major integrators such as Dimension Data.

Bendschneider told CRN that Telstra is "very focused on being a network-centric service provider, we are not attempting to be anything other than what our core strategy is: cloud security, managed networks and unified communications and collaboration. There are a lot of things we're not going to be."

Asked whether Telstra is attempting to become an integrator, she said: "That's not part of our core strategy. No."

According to documents filed with ASIC, O2 Networks turnover $40 million for the full year to 30 June 2013, a 14.7 percent fall from $46.9 million year-on-year.

The company reported profits of $6.2 million for  2012-13, a 29 percent percent fall from $8.8 million the year before.

O2 covers a broad sweep of vendors, especially in the networking and security space. Technology partners include F5 Networks, Riverbed, Aruba, Splunk, Blue Coat, Fortinet, Juniper, Cisco, Endace, Nimble Storage, Akamai, Palo Alto Networks and Amazon Web Services.

It is understood that O2 Networks is one of the few companies that provides enterprise support for Juniper switches in a market dominated by Cisco.

Telstra's enterprise IT adventures

The deal marks another step in Telstra's renewed push in enterprise IT services via acquisition.

In August, the telco acquired 230-staff unified communications integrator NSC Group, in particular for its contact centre offering.

Like O2 Networks, that buyout was brought under Telstra's NAS business, which grew 17.7 percent to $1.5 billion in the last financial year.

In its analysts briefing to reveal the 2012-23 results, Telstra chief executive David Thodey said: "We’ve made a very conscious decision that NAS needs to be a standalone profitable operation in its own right as well.

"So as you see us building our capability in call centres, unified comms, security services, the whole area around video conferencing, those businesses all need to be standalone profitable as well, as well as wrapping around that core network."

In the IT space, Telstra has also been buying up medical IT specialist and e-health companies, namely CA Health, IP Health and Fred IT.

The buyouts show Telstra's keenness to expand in enterprise IT through M&A, after its failed adventures with Kaz almost 10 years ago.

The telco acquired system integrator Kaz from founder Peter Kazacos – now managing director of Anittel – in 2004 for more than $300 million, then sold it to Fujitsu for $200 million five years alter after failing to successfully integrate it.