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Who Would Really Benefit From A Telstra Digicel Buyout?

Concerns have been raised about Telstra being in the hunt for telco Digicel Pacific, with shareholders and analysts suspecting the potential buyout is more about Australia blocking Chinese influence in the region than providing the company with any real benefit.

Telstra confirmed in an ASX release yesterday that it was in talks to purchase Digicel Pacific, the largest owner and operator of 3G and 4G mobile infrastructure across Papua New Guinea, Fiji, Nauru, Samoa, Tonga and Vanuatu. Telstra would take a minority stake in Digicel – whose billionaire owner, Ireland’s Denis O’Brien, wants $2 billion – with the lion’s share of the funding coming from the Australian Government, according to sources reported in the Australian Financial Review.

Denis O’Brien.

However, Telstra shareholders and industry experts quoted in the AFR have expressed mixed opinions over the potential deal, speculating that buying Digicel would not serve Telstra’s commercial interests, instead being a ploy by the Government to stop state-owned China Mobile from buying out the company first and thus gaining access to critical telecommunications networks on Australia’s doorstep. Digicel’s infrastructure already contains significant components from Chinese manufacturers Huawei and ZTE.

In a statement, the Department of Foreign Affairs and Trade said it would not be appropriate to comment on incomplete commercial negotiations.

“Where appropriate, the Australian government supports Australian businesses investing in infrastructure in the Pacific, including communications infrastructure, which plays a key role in economies across the region.

“We do not comment on individual proposals,” the statement said.

For its own part, despite analysts dismissing possible commercial benefits from owning Digicel Pacific, Telstra described the telco in its statement yesterday as “a commercially attractive asset and critical to telecommunications in the region”.

“Digicel Pacific enjoys a strong market position in the South Pacific region generating EBITDA of $US235 million in calendar 2020 with a strong margin, as well as extensive network coverage,” the company said.

Caribbean-based Digicel has been looking to offload its Pacific arm for some time, though last May denied it had been offered $900 million by China Mobile for the company.

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