Telstra teamed with the Australian government to acquire the businesses of the largest operator in the South Pacific region for $1.6 billion, a move industry observers believe is designed to keep Chinese operators from gaining a foothold.
The acquisition of Digicel Pacific is being mainly funded by the Australian government through Export Finance Australia, which is injecting $1.3 billion. Telstra will contribute $270 million, own 100 per cent of the ordinary equity and operate the businesses.
In a statement, Telstra CEO Andrew Penn explained conditions included financial and strategic risk management support from the government, and it taking a minority stake in the deal within certain financial parameters. “I am pleased we have been able to achieve both of those.”
He said the economics of the business in the South Pacific aligns with Telstra’s core strengths.
The deal is expected to close in three to six months.
Security
In a joint statement, Australian government ministers explained the acquisition highlights its commitment to “support the development of secure and reliable infrastructure in the region, which is critical to the Pacific region’s economic growth and development”.
China has been aggressive in providing loans for infrastructure projects across South Pacific in recent years, an area where Australia has long been the dominant backer of many countries.
Digicel Pacific was established in 2006 and operates in Papua New Guinea, Fiji, Nauru, Samoa, Tonga and Vanuatu.
It has about 2.5 million subscribers and 1,700 employees, with service revenue of $431 million in the year ended 31 March.
The majority of revenue is generated in Papua New Guinea.
Digicel Group could receive an additional $250 million based on the unit’s performance over the next three years.
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