Finance Finance News Govt, Telstra to buy Pacific telecoms business

Govt, Telstra to buy Pacific telecoms business

telstra pacific islands
Telstra is putting $US270 million towards a deal with the federal governmnt to buy Digicel Pacific. Photo: AAP
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The federal government is playing up its partnership with Telstra to buy a South Pacific mobile and broadband company as a sign of its commitment to the region.

The government, through Export Finance Australia, will pay most of the $US1.6 billion (about $A2.1 billion) purchase price of Digicel Pacific.

Telstra is putting in $US270 million ($A362 million), with the government financing arm tipping in $US1.3 billion ($A1.7 billion) through a combination of debt and other securities.

In a joint statement, Foreign Minister Marise Payne, Trade Minister Dan Tehan and International Development and Pacific Minister Zed Seselja said the government expected to see a long term return from the deal.

“The acquisition also reflects the government’s commitment … to support the development of secure and reliable infrastructure in the region,” the ministers said on Monday.

Chinese operators, including China Mobile, had also expressed interest in the business started by Irish billionaire Denis O’Brien, who will sit on the new board.

“It’s a tribute to Australia’s commitment to the Pacific,” said Senator James Paterson, who also chairs a parliamentary intelligence and security committee.

“One of the key things about this agreement is that it demonstrates that Australia does so for the benefit of our friends and family in the Pacific, and unlike some other operators in the Pacific, we do so without any strings attached.”

Telstra will own 100 per cent of Digicel Pacific upon the completion of the acquisition by mid-next year.

Chief executive Andy Penn said Telstra had considered acquiring the business after first being approached by the government last year to provide technical advice.

“We previously said that if Telstra were to proceed with a transaction it would be with financial and strategic risk management support from the government,” he said in a statement on Monday.

Digicel Pacific is part of the Digicel Group, which began providing mobile and broadband services in the Caribbean in the 2000s before expanding to the Pacific.

Digicel Pacific operates in Papua New Guinea, Tonga, Fiji, Nauru, Samoa and Vanuatu and has about 2.5 million subscribers and 1700 employees.

One of the partners in its Pacific operations is Huawei, the Chinese company banned from participating in Australia’s 5G network infrastructure in 2018.

Mr Penn acknowledged that partnership on Monday but said he didn’t anticipate any regulatory issues in the Pacific markets, with the company to focus on 4G for now.

“We will work with our local team on the network plan, taking into account our partnerships … there are no issues in the short to near term in relation to that,” he said in a conference call.

Pacific Telecommunications Council vice-president Paul McCann said Telstra’s move into the region had been a long time coming.

“Telstra is inheriting a network that will bring great benefit to the Pacific,” he  said.

The deal is expected to be wrapped up within six months.