O’Brien’s Digicel closes sale of Pacific arm to Australian telco Telstra

14 Jul 2022

Digicel Group chair Denis O'Brien in 2014. Image: ITU Pictures (CC BY 2.0)

Digicel will receive a payment of $1.6bn from Telstra once the deal is closed.

Denis O’Brien’s Digicel has completed the sale of its Pacific arm to Australian telecoms company Telstra in a deal that values the subsidiary at $1.85bn.

The valuation figure is inclusive of a three-year $250m earn-out. A payment of $1.6bn before deduction and other adjustments is payable to Digicel once the deal is closed.

Digicel expects to achieve the maximum figure of €50m for the first earn-out period, which is based on service revenue performance for the year ended 31 March 2022.

Digicel Pacific was founded in 2005 and operates in six markets including Papua New Guinea, Fiji, Samoa, Vanuatu, Tonga and Nauru. The company’s management team will continue to lead the business following the transaction.

Digicel founder and chair O’Brien said the group has “enormous pride” in the Pacific business, which made “affordable, best-in-class” communications available to more than 10m people.

“I am deeply grateful to all our colleagues who contributed to this success and, in particular, to our 1,700 staff in the Pacific who I know will continue to represent the Digicel brand with pride under new owners Telstra,” O’Brien added.

Digicel CEO Oliver Coughlan said: “Post this transaction, Digicel is well positioned to support continuing growth in our well-invested networks in our 25 markets in the Caribbean and Central America.”

Blocking China

Telstra first announced in July 2021 that it was in talks to buy the Pacific arm of Digicel.

An agreement was made last October, with the Australian government providing $1.33bn and Telstra contributing $270m, Reuters reported.

The move by Telstra followed months of reports that a Chinese company was set to buy Digicel Pacific, after the group filed for bankruptcy in 2020.

In December 2020, Digicel 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 that the acquisition could enable Beijing to spy on Australia’s closest geographical neighbours. The Australian government has previously flagged concerns around telecoms espionage in regard to Chinese companies.

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Digicel Group chair Denis O’Brien in 2014. Image: ITU Pictures via Flickr (CC BY 2.0)

Leigh Mc Gowran is a journalist with Silicon Republic