DENIS O’Brien’s Digicel has completed the sale of its Pacific Ocean arm to an Australian company in a deal that values the business at up to US$1.85 billion (€1.84 billion).
The sale to Telstra was backed by the Australian government amid regional interference tensions with China, which placed a national security focus on telecommunications infrastructure.
The price represents 8.3 times Digicel Pacific’s adjusted earnings before interest, taxes, depreciation and amortization of approximately $222 million for the year ended March 31, 2021.
A $1.6 billion payment will be made to Digicel upon closing of the transaction. Digicel also expects to achieve the maximum payment of $50 million for the first earn-out period based on service revenue performance for the year ended March 31, 2022.
Digicel operates the largest cellular networks in Australia’s closest geographic neighbor Papua New Guinea, as well as Fiji, Tonga, Vanuatu, Nauru and Samoa.
The brand will not change in these markets, while the current management team will remain in the division after the sale.
“Having established our Pacific operations as a start-up in 2005, we are immensely proud of a team that has brought affordable, world-class communications to more than 10 million people in six of the region’s most exciting economies,” said Denis O’Brien, Founder and Chairman of Digicel.
Digicel has reached an agreement with the government of Papua New Guinea to initiate international arbitration in Singapore to resolve a controversial one-time exit tax.
This agreement also provides for the state to waive an additional $14.2 million requested in connection with non-payment of the exit tax. As part of this arbitration, $99.4 million was placed in escrow.
Under the administration of Australian Prime Minister Scott Morrison, relations between Canberra and Beijing have been fraught with contention, and there have been concerns about interest in Digicel from Chinese government-affiliated companies.
The Telstra deal was mooted after media reports in 2020 said Chinese companies including China Mobile, Huawei and ZTE were potential bidders for Digicel Pacific.
This prompted a sharp reaction in Australia, which at the time was embroiled in an increasingly bitter trade and security confrontation with Beijing over regional influence, with Australia viewing a Chinese consumer boycott of Australian goods as a ban in all but name.
For its part, Australia banned the use of technology from China’s Huawei in its domestic 5G telecoms infrastructure.
China is a key Australian trading partner, but the government in Canberra is increasingly troubled by the Asian nation’s more assertive stance in the region and in Hong Kong, where Australians have deep economic and social ties.
For Digicel, the Papua New Guinea business is one of the Irish-owned group’s most important units, and its broader Pacific business is relatively less indebted than the group’s other main Caribbean markets, meaning a sale would be a debt-reducing windfall could total.
https://www.independent.ie/business/world/digicel-completes-the-sale-of-pacific-operations-to-telstra-41839116.html Digicel completes sale of Pacific operations to Telstra