Telstra, backed by the Australian government, has reached an agreement to acquire Digicel's South Pacific operations for $1.6 billion. Australia's largest carrier said in a statement on Monday that it will invest $270 million in the acquisition, which will see it own 100% of Digicel Pacific's shares.
Telstra CEO Andrew Penn stated that the details of the transaction had been agreed upon and that he thinks the deal should be completed within six months. Australia's government agreed to finance the majority of the bid for the company.
Digicel is owned by Irish businessman Denis O'Brien and is headquartered in Jamaica. The company operates in 33 markets, mostly in developing nations such as Papua New Guinea, Tahiti, Tonga, Nauru, Samoa, and Vanuatu. After Vodafone, Digicel is Fiji's second-largest carrier.
Trade and Investment Minister Dan Tehan said the government's partnership with Telstra was in line with its mandate to grow quality investments in regional infrastructure, which is important to its economic growth and development.
Analysts said that apart from the economical advantages of the acquisition, the deal is also partly a political move by the Australian government to mitigate China's influence in the region.
The U.S. and a few other nations, including Australia, have pushed to limit China's involvement in telecommunications network upgrades, citing security concerns. This has resulted in strained relations between those nations and China
When Australia invested $130 million for a fiber-optic undersea cable connecting Sydney to Papua New Guinea and the Solomon Islands, the county signaled that it was ready to compete with China in the Pacific. The cable caused the Solomon Islands' government to cancel a contract with Huawei Technologies.
Jonathan Pryke, the program director at the Sydney-based Lowy Institute, said that the government likely decided to back the acquisition over concerns that Digicel may fall into Chinese hands. Pryke said that if Digicel's South Pacific operations were to fall into the hands of a Chinese state-owned entity, it would give China the power to be a significant disrupter in the region. This outcome would not be favorable to Australia, particularly during these times of increased geopolitical tensions.
The deal comes amid a backdrop of China's massive investment in the Pacific over the past decade, which has pushed away many Australian businesses.
