Australia’s Telstra has partnered with the Australian government for a US$1.6 billion acquisition of Digicel Pacific in a move widely viewed as a political stratagem to limit China’s influence in the region.
The Australian government is providing the bulk of the funding for the acquisition ($1.3 billion) via Export Finance Australia, while Telstra is injecting $270 million. The operator group will assume full control of Digicel Pacific, holding 100% of its ordinary equity.
In a statement, Telstra described the acquisition as a "unique and very attractive commercial opportunity to boost our presence in the region.” The group’s CEO Andrew Penn noted that under the terms of the partnership, Telstra will receive financial support and advice on risk management from the government.
According to the BBC, Digicel Pacific employs 1,700 people across Papua New Guinea, Fiji, Samoa, Vanuatu and Tahiti. Last year, Digicel denied a Financial Review report which claimed that it in talks to sell its Pacific unit to China Mobile.
In a joint statement, several Australian government ministers said that the deal would “support the development of secure and reliable infrastructure in the region, which is critical to the Pacific region’s economic growth and development.”
Australia has long been a major financial backer for infrastructure projects across the South Pacific, but in recent years China has sought to make inroads in the territory by providing funds for such initiatives. Earlier this year, we reported that Telstra was looking into an acquisition of Digicel Pacific in partnership with the Australian government.
Jonathan Pryke of the Lowy Institute said: “Digicel is the primary player in the Pacific and Australia sees it as a strategic asset that they can't allow to fall into the hands of China. They are keen to get Australian business back into the Pacific and they've come to the realisation that they are going to have to underwrite.”
Established in 2006, Digicel Pacific registered service revenue of $431 million for the fiscal year ending 31st March 2021, with the majority of this generated in Papua New Guinea. Telstra’s acquisition is expected to be complete within three to six months.