Telstra seals Digicel Pacific deal

Andrew Penn, Telstra CEO

Australian telco, Telstra has partnered with the Australian government to buy Digicel’s South Pacific businesses for $US1.6 billion, finalising negotiations that have been underway for some months.

Telstra will contribute a fraction of the purchase price, $US270 million of equity to the purchase price but will be the owner and operator.

The remaining US$1.33 billion will be fronted by the Australian Government, through Export Finance
Australia, through a combination of non-recourse debt facilities and equity like securities.

Digicel says the transaction is expected to be complete in the first quarter of 2022 subject to regulatory approvals.

Digicel operates in Papua New Guinea, Fiji, Samoa, Vanuatu, Tonga and Nauru. It recorded sales of approximately US$450 million and adjusted earnings before interest, tax, depreciation and amortisation of approximately US$ 222 million in the year ended March 31, 2021, plus up to an additional $US250 million subject to business performance over the next three years, according to an official statement from the company.

The sale will see no change to the Digicel brand, and no changes to the management team, although Irish founder Denis O’Brien will join the Board of Directors of the newly formed holding company in order to provide some continuity.

Commenting on the sale, O’Brien said: “I am very pleased that today’s agreement with Telstra, our very near neighbour in the Pacific, will further enhance DPL’s infrastructure, data and call termination links with one of the largest and most reliable networks in Australia. I thank all of our colleagues in the South Pacific and beyond who have made today possible and I remain committed to ensuring a successful transition in my ongoing role as a director of the newly formed holding company for DPL.

“From a Digicel perspective, today marks a very successful realisation of a strategic investment following our entry in the South Pacific in 2006,” O’Brien added.

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.

“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.