Business

Telstra to buy Digicel Pacific in Australia government-backed $1.6 bln deal

Article content

SYDNEY — Telstra Corp Ltd said on Monday it agreed to buy the Pacific operations of telecom firm Digicel Group in a $1.6 billion deal largely funded by the Australian government and seen as a way to contain China’s rising influence in the region.

The government will front $1.33 billion of the total value, with Telstra contributing the rest, the Australian telco and the government said in a statement.

Telstra first revealed https://www.reuters.com/business/telstra-australian-govt-finalizing-bid-digicels-pacific-assets-sources-2021-10-14 in July the Australian government had approached it to help it buy the business.

Advertisement

Article content

“Digicel Pacific is a commercially attractive asset and critical to telecommunications in the region,” Telstra Chief Executive Officer Andrew Penn said in a statement on Monday.

“The Australian government is strongly committed to supporting quality private sector investment infrastructure in the Pacific region.”

The transaction includes a $250 million earn-out clause, subject to the performance of the business unit over three years, which could increase the overall value of the deal, Digicel said in a statement.

Digicel last year denied an Australian newspaper report it was considering a sale of its Pacific business to state-owned China Mobile Ltd as the heavily indebted telco restructured its business.

Advertisement

Article content

A sale of Digicel to a Chinese company would have been a cause of concern for the Australian government, amid rising strategic competition between Washington allies and Beijing in the Pacific region.

In recent years, China has provided funding for several Pacific infrastructure projects, increasing debt obligations in some small island nations, and has won international recognition from several countries that had previously aligned with Taiwan.

“Given the proximity of the Pacific to Australia and given the geopolitical issues between Australia and China, the Australian government was quite concerned about the idea of a Chinese company owning a major telecommunications company in the Pacific,” said Amanda Watson, a researcher from Australian National University’s Department of Pacific Affairs.

Advertisement

Article content

Diplomatic relations between the two nations have deteriorated in recent years, with China imposing trade sanctions on produce from Australia and reacting angrily to its 5G ban sidelining telecoms giant Huawei.

‘POLITICAL BUY’

Australian telecoms analyst Paul Budde described the Telstra deal as a “political buy.”

“If the government had not asked and underwritten it, Telstra would not have done it,” Budde told Reuters.

“Will Telstra be able to take over and run that business in an efficient way that makes money? It’s definitely possible but it will be a challenge.”

Digicel, a Caribbean telco founded by Irish billionaire Denis O’Brien, is the largest mobile phone carrier in the Pacific, with operations in Papua New Guinea, Fiji, Samoa, Nauru Vanuatu and Tonga – the most lucrative being those in Papua New Guinea (PNG).

Advertisement

Article content

Formerly administered by Canberra, PNG has turned increasingly to China for financing. It is one of the largest economies in the South Pacific, underpinned by energy and mineral resources.

The country’s rugged geography has created a natural barrier for telcos to compete with Digicel’s existing infrastructure, with many of PNG’s roughly nine million people spread out over remote villages and highlands.

Penn told analysts on Monday that Telstra was comfortable with having assets in diverse political environments.

He said the telco had met the PNG leadership team which would remain in place and he said the PNG government had indicated that it supported Telstra’s involvement.

The transaction, subject to various government and regulatory approvals, is expected to take up to six months to complete, according to Telstra and Digicel.

Telstra, a former government-owned telco, has been trying to restructure its operations as it faces persistent headwinds on its fixed-line business.

Telstra shares were up almost 3% in early afternoon trading, helping push the broader market up 0.6%. (Reporting by Byron Kaye and Jonathan Barrett; Additional reporting by Nikhil Kurian Nainan; Editing by Peter Cooney, Stephen Coates and Lincoln Feast.)

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Share this news on your Fb,Twitter and Whatsapp

File source

NY Press News:Latest News Headlines
NY Press News||Health||New York||USA News||Technology||World News

Tags
Show More

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button
Close