Australian telco Telstra in talks to buy Digicel’s Pacific arm

19 Jul 2021

Image: © Yanawut Suntornkij/Stock.adobe.com

While the deal is not complete, reports indicate Telstra has made a €2bn bid, with most funds coming from the Australian government.

Following speculation over the weekend, Australian telecoms company Telstra has confirmed that it is in talks to buy the Pacific arm of Denis O’Brien’s Digicel.

First reported in The Age and The Sydney Morning Herald on Saturday (17 July), the Australian company has been in discussions regarding a joint bid with the Australian government to acquire Digicel Pacific.

According to The Sydney Morning Herald, sources close to negotiations said the company has made a bid of $2bn with $1.5bn potentially coming from the Australian government.

In a statement released today (19 July), Telstra confirmed that discussions were taking place but that they were incomplete with no certainty that a transaction will proceed.

“Telstra was initially approached by the Australian government to provide technical advice in relation to Digicel Pacific which is a commercially attractive asset and critical to telecommunications in the region. If Telstra were to proceed with a transaction it would be with financial and strategic risk management support from the government,” it said.

“In addition to a significant government funding and support package any investment would also have to be within certain financial parameters with Telstra’s equity investment being the minor portion of the overall transaction.”

Blocking China’s play

The move follows months of reports suggesting that a Chinese company was in the running to Digicel’s Pacific arm, after the company filed for bankruptcy last year.

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Digicel Pacific was founded in 2006 and has a strong market position in the region, operating in more than 30 countries across the Caribbean and the Pacific including Papua New Guinea, Fiji, Samoa and Tonga.

Telstra said Digicel Pacific generated earnings before interest, taxes, depreciation and amortisation of $235m in 2020.

In December last year, the company confirmed it had received a number of unsolicited takeover approaches, with media reports suggesting Chinese brands such as Huawei, ZTE and China Mobile were in the running.

This led to concern among national security experts in Canberra and Washington who expressed concern that the acquisition could enable Beijing to spy on Australia’s closest geographical neighbours.

The current discussions between Telstra and Digicel could be the Australian government’s way of blocking a Chinese company from making the purchase and alleviating those concerns.

The Australian government has flagged concerns around telecoms espionage in regard to Chinese companies before.

In 2018, it banned Huawei and ZTE from supplying equipment for its commercial 5G mobile network.

Jenny Darmody is the deputy editor of Silicon Republic

editorial@siliconrepublic.com