The acquisition will largely be funded by the Australian taxpayers with the government contributing $1.9 billion to the $2.1 billion sale.
Telstra will contribute $US270 million in equity, and the government, through Export Finance Australia will contribute US$1.33 billion to the $US1.6 billion purchase price. The government will also provide us with strategic risk management support. Telstra will own 100 per cent of the ordinary equity.
“Australia has deep personal, historical and cultural ties with the Pacific, forged over decades of sustained engagement, and Telstra, via our International team has been doing business there for decades,” said Telstra chief executive Andy Penn.
“This is a unique and very attractive commercial opportunity for Telstra to boost our presence in the region. "
With 1700 employees and around 2.5 million subscribers from retail customers through to large enterprises, Digicel Pacific is the number one telco in Papua New Guinea, Nauru, Samoa, Tonga and Vanuatu, and number two in Fiji. The business generated EBITDA of US$233 million for the financial year ended 31 March 2021 with a relatively high EBITDA margin of 54 per cent.
"Clearly Australia has a keen interest in the Pacific region and provides finance … to large businesses like Telstra interested in investing in the region, and really that's the origins of this transaction," Mr Penn said in an interview with ABC News yesterday.
“Telstra has also been a licensed operator in Papua New Guinea since 2012 and we already provide connectivity and technology services to a number of large enterprises there.”
Mr Penn said at Telstra’s recent T25 strategy launch it announced the ambition for its International business was to deliver profitable growth and value by leveraging the growing strategic significance of our international network.
“This announcement represents an important initiative in the delivery of this ambition,” he said.
Australia Trade Minister Dan Tehan said in an interview about the purchase yesterday that the government was intent on encouraging better infrastructure in the region.
"The thing that was in the forefront of the government's mind is that we continue to see quality investment in the Pacific. That's what drove the government's decision making," he said.
The deal is expected to be completed within the next six months.
The Department of Foreign Affairs and Trade said in a statement the acquisition is "consistent with Australia's longstanding commitment to growing quality investment in regional infrastructure".
"Telstra's acquisition sends an important signal about the company's potential and about wider business confidence in the future of the Pacific region.”