Telstra, an Australian carrier, has joined with the Australian government to buy Digicel’s South Pacific operations for $1.6 billion, preventing a vital piece of the region’s telecommunications infrastructure from falling into Chinese hands.
Telstra, Australia’s largest carrier said in a statement on Monday that it will contribute $270 million to the acquisition and own all of Digicel Pacific’s shares.
Telstra CEO Andrew Penn stated that the details of the transaction had been agreed upon and that it will be completed within six months.
“Digicel Pacific is a commercially appealing asset that is vital to regional telecommunications,” Penn added.
Denis O’Brien, an Irish businessman, owns Digicel, which is based in Jamaica and incorporated in Bermuda. It works in 33 markets across the globe; all of them are in poor countries.
In Papua New Guinea, Tahiti, Tonga, Nauru, Samoa, and Vanuatu, it is the dominant mobile phone provider. After Vodafone, it is Fiji’s second largest carrier.
The cooperation with Telstra, which was originally a state-owned monopoly, is “compatible with Australia’s longtime commitment to growing quality investment in regional infrastructure,” according to Trade and Investment Minister Dan Tehan.
The agreement also underlined Australia’s commitment to assisting the region’s development of safe and reliable infrastructure, which is important to the region’s economic growth and development, according to Tehan.
The United States and a few other nations have pushed to limit Chinese telecoms equipment producers’ engagement in communications network upgrades, citing security concerns. Furthermore, Australia-China trade and other relations have been strained for some years on a variety of issues.
When Australia paid $130 million for a fiber-optic submarine telecommunications cable connecting Sydney to Papua New Guinea and the Solomon Islands, it signaled that it was ready to compete with China in the Pacific on telecommunications. The cable caused the Solomon Islands’ government to cancel a contract with Huawei, a Chinese company, to run a cable to Sydney.
Australia’s biggest concern regarding Chinese control of Digicel, according to Jonathan Pryke, Pacific Islands program director at the Sydney-based Lowy Institute international policy think tank, is how heavily Pacific economies would come to rely on 5G telecommunications networks.
“Utilities will rely on 5G networks to function, and if Digicel were to fall into the hands of a Chinese state-owned enterprise — and while Digicel is not a monopoly, it does have a very dominant market share — it would give China the power to be a significant disruptor in these economies in times of geopolitical tension,” Pryke said.
“If China and Australia are truly at odds, China might flip a switch in Papua New Guinea and wreak all kinds of havoc, diverting Australia’s attention,” he warned, referring to Australia’s closest neighbor.
The agreement comes amid China’s heavy investment in the Pacific in the last 15 years, mostly through the private sector. Businesses in Australia have withdrawn from the region because it is perceived to be too complicated, hazardous, and unprofitable.
“Australia is really keen to reintroduce Australian companies to the region,” Pryke added. “We can’t command and control them the way China can, so we have to motivate them.” This is a significant inducement.”
