Australian taxpayers will provide $1.9 billion to Telstra to help it buy South Pacific telco operator Digicel from billionaire Irishman, Denis O’Brien.
The purchase has been on the cards for several months now after it became clear Chinese companies wanted to buy Digicel and its South pacific mobile phone network.
Telstra will own 100% of the new entity Digicell.
The telco told the ASX on Monday the $US1.6 billion ($2.1 billion) deal would be completed within six months.
Telstra chief executive Andy Penn said Digicel was a commercially attractive asset and the company would contribute $US270 million of equity to the purchase price, which the federal government will finance through Export finance Australia which will provide the remaining $US1.33 billion through a combination of non-recourse debt facilities and equity like securities
“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,” Mr Penn said in Monday’s announcement.
“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 Mr Penn.
Mr 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.
“The transaction does not distract from Telstra’s T22 or T25 strategies and represents a unique commercial opportunity. It is consistent with the Australian Government’s interest in encouraging quality investment in the Pacific, the financial arrangements make it very attractive for Telstra and it strengthens our relationships with the Australian Government and the Pacific region.
“The Board unanimously believes the transaction is in the best interests of shareholders and it is on this basis that Telstra has agreed to proceed with the acquisition,” Mr Penn said.
