Aust-backed Telstra buys Digicel


TELSTRA and the Australian government are buying Digicel Pacific operation for US$1.6 billion (about K5.48 billion), according to Telstra.
The Australian telecommunications company in a statement yesterday said the acquisition included an additional US$250 million (about K857 million) subject to business performance over the next three years.
The Digicel business will be owned and operated by Telstra.
Telstra is contributing US$270 million (about K926 million) of equity to the US$1.6 billion purchase price and the Australian government, through export finance.
Australia, is providing the remaining US$1.33 billion (about K4.45 billion) through a combination of non-recourse debt facilities and equity like securities.
Telstra will own 100 per cent of the ordinary equity.
Chief executive officer Andrew Penn said 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.
Penn said the partnership represented an important milestone in the company’s relationship with the Australian government.
He said the terms of the sale had now been agreed with completion expected to occur in the next three to six months.
“Digicel Pacific is a commercially attractive asset and critical to telecommunications in the region,” Penn said.
He said the Australian government was 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.”
Penn said the acquisition was attractive for a number of reasons including the economics of the Digicel Pacific business, alignment with Telstra’s core strengths as well as the support from the Australian government.
“Digicel enjoys a strong market position in the South Pacific region holding a strong number one position in all markets other than Fiji where it is the number two.
“The combined business generated EBITDA of US$233 million (about K817 million) for the financial year ended March 31, with a strong margin.”
Penn said Digicel Pacific had already invested significant capital in Papua New Guinea, which was its largest market, to achieve extensive network coverage including 4G to 55 per cent of the population.
Upon completion of the transaction which is subject to Government and regulatory approvals and following Telstra’s corporate restructure, the Digicel Pacific investment will be held by Telstra International which will become a fourth subsidiary of the new Telstra holding company, announced as part of its legal restructure.
The Digicel Pacific business will be overseen by a Telstra controlled board which will also include current owner Denis O’Brien and two independent directors.