Telstra has announced this week it will partner with the Australian Government to acquire and manage mobile network company Digicel Pacific. Digicel Pacific is currently the leading telecommunications operator in the South Pacific.
Over the past 15 years Digicel Pacific has earned a place as the foremost telecommunications provider for South Pacific nations Papua New Guinea, Nauru, Samoa, Vanuatu, Tonga and Fiji. The company generates roughly $575 million in revenue annually.
The Australian Government has committed to provide $2.14 billion to support the acquisition. Financing from the Government will include debt and equity-like securities to ensure a return on investment. Telstra will provide $360 million in equity.
The deal comes as a part of the Australian Government’s ‘Pacific Step-up’ plan to prioritise engagement with the Pacific. Prime Minister Scott Morrison committed to the plan in a meeting with G20 leaders earlier this year. The Government approached Telstra regarding the deal in hopes of progressing their plans to forge greater ties with Pacific nations.
“Digicel Pacific is a commercially attractive asset and critical to telecommunications in region. The Australian Government is strongly committed to supporting quality private sector investment infrastructure in the Pacific region,” Telstra CEO Andrew Penn said.
Reports suggest that the biggest telecommunications operator in China—China Mobile—had shown interest in acquiring Digicel prior to Telstra sealing the deal.
Trade Minister Dan Tehan has rejected assertions that this drove the decision.
“The thing that was in the forefront of the government’s mind is that we continue to see quality investment in the Pacific. That’s what drove the government’s decision-making,” Mr Tehan explained.
Expert in Pacific communicationrs Amanda Watson provided the ABC with insight into the geopolitical strategy that may be underlying the deal.
“Australian officials were concerned about whether a Chinese company or potentially a Chinese state-owned entity might look to buy Digicel’s Pacific arm and there were some geopolitical and geostrategic concerns about a Chinese company owning a major telecommunication company in the Pacific region, which is of course so close to Australia,” Ms Watson told the ABC.
Digicel Pacific’s founder, Denis O’Brien, is supportive of the move.
“Today’s announcement is a tremendous testament to our colleagues across Digicel Group and in particular, our 1700 staff in the Pacific,” said Mr O’Brien.
The acquisition is said to be finalised sometime in 2022.