Telstra is scheduled to pay at least US$1.6 billion (A$2.1 billion) for South Pacific carrier Digicel, with the federal government funding more than 80% of the purchase price. The talks were originally revealed in mid-July and have regional security implications, with Australia concerned that Chinese interests may purchase Digicel. Historically, Australia invested in South Pacific telecommunications infrastructure to avoid it being controlled by China and used as an interconnection gateway into Australian internet connectivity.
In a financial statement, Telstra stated that the Australian government will contribute US$1.33 billion to Digicel, with Telstra investing US$270 million but holding “100% of the ordinary shares.”
Telstra CEO Andrew Penn stated that the acquisition resulted from a contract “to give technical advise” to the administration on Digicel. It was “an major milestone in relationship with the Australian government,” he added.
He also stated that the purchase “exceeds all Telstra mergers and acquisitions requirements,” and that the deal is likely to be completed within three to six months, subject to regulatory and other clearances.
Digicel will be absorbed into Telstra International after the merger is completed. It will be governed by a Telstra-controlled board that includes existing owner and founder Denis O’Brien and two independent directors. Digicel provides telecommunications services in Papua New Guinea, Fiji, Nauru, Samoa, Tonga, and Vanuatu. It serves over 2.5 million members and employs approximately 1700 people. The vast majority of revenue is earned in PNG.