Australia biggest and foremost telecoms firm, Telstra, announced Friday that its Chinese subsidiary, SouFun filed for an initial public offering (IPO) with the U.S Securities and Exchange Commission. Telstra is Australia’s leading phone services provider and it expects to conclude the IPO by the end of this month. From its announcement, the Chinese subsidiary will be priced at around $810 million to $850 million, and it is expected to peg a share price variance of $$40.50 to $42.50.

However, General Atlantic and Apax Partners will forge ahead with their planned purchase of the Telstra subsidiary. Telstra as well reiterated that its planned sell of 50.5% stake in SouFun for about $400 million to the two firms will go ahead before the IPO. SouFun is China’s second biggest online real estate website. However, SouFun’s remaining 25% stake will go into the IPO and the remainder is expected to be sold to institutional and strategic investors.

There had been varying speculations over the estimated price of the Telstra subsidiary in the float. Initially, the New York Stock Exchange float was pegged at about $1 billion. But even so, reports had emerged that Deutsche Bank, JP Morgan Chase & Co, Bank of America Merrill Lynch and UBS have been working on the deal. SouFun has a presence in 104 Chinese cities with 20 million registered users.

However, it plays in a market that has rivals such as Chinese market leader, China Real Estate Information that raised $216 million in its IPO last year. Telstra shares have come under duress recently, ever since it announced that it expected its 2011 earnings to fall sharply. The firm had undertaken major investments to curtail a declining market share. Telstra bought a stake in SouFun four years ago for about $254 million. At the purchase, Telstra had reiterated that any profit from the sale of the Chinese subsidiary would be affected by changes in exchange rates.

The plunge in global equities markets earlier this year thwarted Telstra's original plan to float SouFun before June 30, and continuing uncertainty in financial markets has seen the float priced at the lower end of the $US800m to $US1 billion range of market estimates.

The filing of the IPO follows Telstra's deal last month to sell its stake to a consortium on a valuation of SouFun at $US810m, if the IPO is not completed within a "specified time period".

3 Sep 2010.