Telstra to buy Digicel Pacific with government backing
Australian service provider Telstra has announced an agreement to buy Digicel Pacific, the Pacific arm of Jamaica-based Digicel. The Australian government is backing the deal strongly, with $1.33 billion of the $1.6 billion purchase price coming from Export Finance Australia in the form of what the government termed “debt and equity like securities.” The deal, which is subject to regulatory approvals, is expected to close in the first quarter of 2022, according to Digicel; Telstra estimates the closing will occur in 3 to 6 months. The agreement also calls for up to another $250 million to go to Digicel, subject to business performance over the next three years.
Digicel Pacific serves approximately 2.5 million residential and business subscribers in Fiji, Papua New Guinea, Nauru, Samoa, Tonga, and Vanuatu. Telstra already provides connectivity and technology services to large-scale enterprises in Papua New Guinea. The unit generated EBITDA of $233 million for the financial year ended March, 31, 2021 with an EBITDA margin of 54%, according to a post from Telstra CEO Andrew Penn.
Assuming the transaction closes, Telstra will own 100% of Digicel Pacific’s equity. The business will operate as a separate entity under its current brand within Telstra’s International division, with separate P&L and IT systems. The existing management team will run the operations, with founder current owner and Denis O’Brien joining as a director.
The Australian government is said to be willing to be willing to provide so much financing because of its concerns that Digicel Pacific would be sold to a Chinese firm such as China Mobile. “Telstra was initially approached by the Australian Government to provide technical advice in relation to Digicel Pacific and subsequently considered acquiring the business with financial and strategic risk management support from the Government. Mr. Penn said the partnership represented an important milestone in the company’s relationship with the Australian Government,” according to Telstra’s announcement of the agreement.
“Digicel Pacific is a commercially attractive asset and critical to telecommunications in the region. The Australian Government is strongly committed to supporting quality private sector investment infrastructure in the Pacific region. We previously said that if Telstra were to proceed with a transaction it would be with financial and strategic risk management support from the Government. We also said that in addition to a Government funding and support package, any investment would also have to be within certain financial parameters with Telstra’s equity investment being the minor portion of the overall transaction. I am pleased that we have been able to achieve both of those outcomes,” said Penn.
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Stephen Hardy | Editorial Director and Associate Publisher, Lightwave
Stephen Hardy is editorial director and associate publisher of Lightwave and Broadband Technology Report, part of the Lighting & Technology Group at Endeavor Business Media. Stephen is responsible for establishing and executing editorial strategy across the both brands’ websites, email newsletters, events, and other information products. He has covered the fiber-optics space for more than 20 years, and communications and technology for more than 35 years. During his tenure, Lightwave has received awards from Folio: and the American Society of Business Press Editors (ASBPE) for editorial excellence. Prior to joining Lightwave in 1997, Stephen worked for Telecommunications magazine and the Journal of Electronic Defense.
Stephen has moderated panels at numerous events, including the Optica Executive Forum, ECOC, and SCTE Cable-Tec Expo. He also is program director for the Lightwave Innovation Reviews and the Diamond Technology Reviews.
He has written numerous articles in all aspects of optical communications and fiber-optic networks, including fiber to the home (FTTH), PON, optical components, DWDM, fiber cables, packet optical transport, optical transceivers, lasers, fiber optic testing, and more.
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