UPDATE 1-Australia's Telstra to offload majority stake in struggling Sensis
* Telstra to sell 70 percent of Sensis to Platinum Equity for $407 mln
* Valuation much lower than market expectations
* Telstra builds war chest for new growth business, analysts say (Adds company comments, analyst comments, sale details, background)
By Maggie Lu Yueyang
SYDNEY, Jan 13 (Reuters) - Australia's biggest phone company Telstra Corporation Ltd has agreed to sell 70 percent of its directories unit Sensis, offloading a struggling business challenged by digital transition for less than the market had anticipated.
The sale of Sensis, following Telstra's sale of Hong Kong mobile phone business last month, would further boost the telco giant's cash war chest to invest in new growth businesses and expand its mobile network.
Telstra said on Monday that it had agreed to sell the Sensis stake to Platinum Equity, a U.S.-based private equity firm, for A$454 million ($407.17 million).
Telstra will retain 30 percent of Sensis, a business valued at A$649 million, it added.
Analysts had said the entire business was worth as much as A$3 billion.
"This is Telstra getting out as soon as they can because it believes the business in the longer term may not be as viable as some people suggest," said IG market strategist Evan Lucas.
He added that the deal was "disappointing" from a price perspective but was "probably a good thing" for Telstra as a whole.
Telstra shares dipped 0.1 percent to A$5.26 at 0009 GMT.
Sensis publishes print and online directories including the White Pages and the Yellow Pages.
The unit generated earnings before interest, taxation, depreciation and amortisation (EBITDA) of A$571 million for the year ending June 2013, down 22 percent from the previous year. Chief Financial Officer Andrew Penn told investors in an August briefing that the transitioning of the Sensis business to a digital model remained "challenging".
"We have spent the last two years enhancing our print directories business with a rich set of digital directory offerings," Telstra chief executive David Thodey said in a statement on Monday.
"To drive further momentum, we believe it is the appropriate time to introduce Platinum Equity as a strategic partner."
But the sale price implies the business could be in deeper trouble than people had thought, said another telecommunications analyst who declined to be named according to company policy.
"I think a lot of people in the market thought maybe it's around one billion," he said.
"It's obviously under more pressure than we had anticipated."
The sale does not include the voice services business, but it does include economic benefits to Telstra from services it will continue to provide to Sensis, Telstra said.
In December, Telstra agreed to sell its Hong Kong mobile phone business for $2.4 billion to HKT, a company controlled by billionaire Richard Li.
($1 = 1.1150 Australian dollars) (Reporting by Maggie Lu Yueyang; Editing by Stephen Coates)
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