Coalition backbenchers are starting to get antsy about the prospect of a Telstra fire sale, according to David Crowe in this morning’s Fin (not online). The price isn’t right, and who wants to face an army of angry investors looking for someone to blame if their shares have gone nowhere when the next election rolls around?

Of course that problem would be solved if there were a good news story hidden somewhere in the Telstra business, a bit of upside that could smooth the sale and deliver for investors in the short to medium term. But what? 

A couple of years back Telstra pinned its hopes on that string of newspapers with all the little ads — the Trading Post — which it bought for $636 million in 2004 after a bidding war with Fairfax. At the time, Fairfax executives scoffed at the price and claimed they wouldn’t have dreamt of trying to match an offer they saw as over the odds.

So was there something Sensis management knew to justify the optimism?Unfortunately for Telstra, the answer is no. According to analysts, in order to get a half-decent return on that the investment, Sensis would’ve been projecting EBITDA growth of at least 10% a year. Instead some worrying numbers were buried in Telstra’s results last week which revealed that Trading Post revenue had gone backwards by 7% in the 05/06 financial year.

According to one source, the EBITDA was around $58m for 05/06 (on overall revenue in the vicinity of $150m). But as a stand-alone entity in 2006, Trading Post should have achieved something over $175m in revenue and over $70m in EBITDA based on what would have been reasonable assumptions at the time of the purchase.

That’s a big gap and these are not the sort of figures analysts were looking for with Sensis still insisting it will double its earnings by 2011. There’s also a question of whether the $10m Telstra predicted in synergies have materialised or whether the company has simply shifted costs Sensis.

The Trading Post has two main revenue streams — motoring and general product classifieds. Both are suffering from a “structural shift” to online products like eBay and Drive.com.au. Then there’s a big question mark over Telstra’s ability to run a classified business. Staff who worked for Trading Post’s former Dutch owner, Trader Classified Media NV, and left after the sale, are rumored to have been less than impressed with the new owner’s bureaucratic management style.

Last week Sensis chief executive Bruce Akhurst did his best to put a positive spin on the figures, telling Neil Shoebridge in the Financial Review that “the good news is Trading Post’s online revenue is up 250% [to $10 million].” But the figure is an illusion, coming off an impossibly small base because the business was built initially by putting the ads online for nix.

But the online division is going nowhere while circulations of the paper and ink version of Trading Post have dropped sharply in recent years. If the Government and Sol Trujillo are looking for a rabbit to pull from their hat, Trading Post isn’t it.