Australian communications and technology company Telstra Corp. Ltd. says it is in discussions to acquire the Pacific operations of telecommunications company Digicel Group - with the backing of the Australian government.
The move by Telstra to buy Digicel's Pacific business for A$2 billion ($1.5 billion) is widely viewed as a political block to China's growing clout in the region.
It is part of an effort to reduce Digicel's debt and ease worries the unit could end up in the hands of a China company, Nikkei Asia reported.
Digicel has been concentrating on restructuring its $5.4 billion debt after filing for Chapter 15 bankruptcy proceedings in the U.S. in May last year.
Digicel's future has also been speculated on for several months.
Last year, the Jamaica-based telecommunications company denied an Australian newspaper report it was planning to sell its Pacific operations to state-owned China Mobile Ltd.
Australia is not comfortable about China Mobile gaining a foothold in the South Pacific in the face of the strategic rivalry between U.S. allies and China in the Pacific region, Reuters said.
Australia is a member of the Quad Group, together with the U.S., Japan and India, whose goal is to counter China's expanding interests in the Indo-Pacific.
Telstra said the discussions were incomplete and there was no certainty a transaction would proceed.
A Digicel representative declined to comment. A representative for Australia's Minister for the Pacific also declined to comment.
The China embassy in Canberra did not respond to requests for comment.
"Digicel is the primary player in the Pacific and Australia sees it as a strategic asset that they can't allow to fall into the hands of China," Reuters quoted Jonathan Pryke as saying.
Pryke is director at Pacific Islands Program at the Lowy Institute, a Sydney-based think tank.
Digicel Group, founded in Jamaica by Irish business owner Denis O'Brien, is active in 32 markets in Central America, the Caribbean and Asia Pacific.
Digicel holds market shares of more than 90% in Papua New Guinea and more than 50% in Tonga, Fiji, Tahiti, Vanuatu and Samoa.