Telstra to buy Digicel Pacific in Australia government-backed US$1.6b deal

[BENGALURU] Telstra Corp said on Monday it agreed to buy the Pacific operations of telecom firm Digicel Group in a US$1.6 billion deal largely funded by the Australian government and seen as a way to block China's rising influence in the region.

The government will front US$1.33 billion of the total value, with Telstra contributing the rest, the Australian telco and a government statement said.

With China building its influence in the region, and months of market and media speculation surrounding Digicel's future, Telstra said the Australian government approached it to help it buy the business.

A sale of Digicel to a Chinese company would be a cause of concern for the Australian government.

"The acquisition also reflects the government's commitment, as part of its Pacific Step Up, to support the development of secure and reliable infrastructure in the region, which is critical to the Pacific region's economic growth and development," a joint statement by several government ministers said.

Telstra will fully own and operate Digicel's Pacific operations, it said.

Digicel, founded by Irish billionaire Denis O'Brien, is the largest mobile phone carrier in the Pacific, with operations in Papua New Guinea, Fiji, Samoa and Vanuatu - the most lucrative being those in Papua New Guinea.

The deal includes a US$250 million earn-out clause, subject to the performance of the business unit over three years, that could increase the overall value of the deal, Digicel said in a statement.

The transaction, subject to various government and regulatory approvals, is expected to take up to six months to complete, according to Telstra and Digicel.

REUTERS