Australia Funds Telstra Buy Of Digicel Pacific To Thwart China

The Pacific operation of the Jamaica-based mobile operator Digicel has been acquired by a joint venture, compromising the Australian government and Australian telecoms giant Telstra.

The venture has acquired Digicel Pacific, which is the Digicel operation in Papua New Guinea, Fiji, Nauru, Samoa, Vanuatu and Tahiti. It employs 1,700 people in those countries and provides mobile phone and home entertainment services to the local population.

For some months now, there has been speculation as to the future of Digicel Pacific, after its parent denied last year a report that it was in talks to sell the Pacific operation to state-owned China Mobile, which is the largest mobile operator in China.

Digicel Pacific

Now it has emerged that the Australian government and telecoms giant Telstra are buying Digicel Pacific for A$2.1bn ($1.6bn).

However the Australian government will mostly pay for the purchase by contributing A$1.9bn of taxpayers money.

Telstra said it would contribute $360 million and own 100 percent of the company’s ordinary equity.

The move is being viewed as a political block to China’s influence in the region, and comes just a month after China was blindsided by a landmark defence and security agreement called AUKUS, between Australia, the United Kingdom and the United States.

The AUKUS agreement sees the US and UK for the first time agree to share their nuclear propulsion submarine technology with Australia, so it can build a fleet of at least eight nuclear-powered, attack class submarines, to counter the growing threat of China.

And AUKUS also allows the UK and the US to share with Australia their expertise in cyber, AI and even quantum computing.

The Australian government decision to mostly bankroll Telstra’s acquisition of Digicel Pacific effectively stops China from gaining a telecom asset on the doorstop of the Australia mainland.

Chinese control of telecommunications networks has long been a concern for the United States and its allies. Hence the banning of Huawei 5G kit in Australia, the UK, US and other countries.

Deep ties

The CEO of Telstra, Andrew Penn, explained the decision to acquire Digicel Pacific, the biggest mobile operator in the South Pacific region, would allow it to strengthen Australia’s “deep personal, historical and cultural ties with the Pacific”.

“In fact, our mobile network in the Torres Strait Islands is just off the coast of Papua New Guinea, Digicel Pacific’s largest market,” said Penn. “This is a unique and very attractive commercial opportunity for Telstra to boost our presence in the region.

Penn said that Digicel Pacific has 1,700 staff and 2.5 million subscribers, and the operation is profitable and generated $233 million (US) profit last year.

“Beyond the economics, this acquisition also makes sense for a number of reasons,” said Penn. “Telstra has decades of experience providing international connectivity in the Pacific. In fact, we are one of the biggest providers of voice and data services connecting the South Pacific to the rest of the world through our Southern Cross subsea cable.”

“Telstra has also been a licensed operator in Papua New Guinea since 2012 and we already provide connectivity and technology services to a number of large enterprises there,” he added. “And of course, we are very experienced in delivering and operating mobile networks that cover some of the remotest parts of Australia – from the coast, to the outback and the Torres Strait Islands.

“Telstra and Digicel Pacific have many things in common, including our company purpose and values – what we stand for and the impact we have on our local communities,” said Penn.