Digicel aims to sell Pacific unit by end of July; appeals to ICSID over PNG tax

Digicel aims to sell Pacific unit by end of July; appeals to ICSID over PNG tax

Digicel Group has reportedly informed bondholders that it expects to close the sale of its Pacific operations by the end of July 2022.

As we reported in October 2021, Digicel agreed to sell its Digicel Pacific unit – which includes subsidiaries in Fiji, Nauru, PNG, Samoa, Tonga and Vanuatu - to Australia’s Telstra for around US$1.6 billion. The Australian government is providing most of the funding (US$1.3 billion) for the acquisition, which is widely viewed as a move to contain China’s growing influence in the region.

However, an obstacle to the sale arose in April 2022 when the government of Papua New Guinea amended its Income Tax Act, imposing an Additional Company Tax (ACT) that applied to the telecoms and banking sectors. This effectively hit Digicel PNG with a PGK350 million (US$97 million) tax liability, with the threat of a further US$14 million for non-payment.

At the time, Digicel’s Irish owner Denis O’Brien said that the levy threatened to derail the sale, claiming that PNG Prime Minister James Marape has assured Digicel that the tax would not be implemented. The Irish Times has now reported that Digicel has agreed to enter arbitration with the government of PNG to settle the tax dispute.

TeleGeography reports that Digicel has paid the disputed US$100 million into an escrow account and is awaiting the result of the arbitration process. For its part, the PNG government has agreed to waive the non-payment fee.

However, PNG-based newspaper Post Courier reports that Digicel PNG has now filed an appeal with the International Centre for Settlement of Investment Disputes (ICSID) over the tax law in question. The outlet adds that BSP Financial Group is challenging the law via Papua New Guinea’s Supreme Court, arguing that it should be declared unconstitutional.


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