Telstra demands financial parameters be met before finalising Digicel Pacific deal

Australian telco, Telstra, is demanding that certain financial parameters be met before the company purchases Digicel’s Pacific unit.

Last month Telstra announced that it was locked in negotiations with Digicel after disclosing that “Digicel Pacific is a commercially attractive asset”. But chief executive Andrew Penn maintained that the deal is not yet guaranteed. Penn disclosed last week that Telstra will only make the acquisition if it yields adequate financial return for its shareholders.

Andrew Penn, CEO, Telstra (Photo: CMO Australia)

“Given the nature of these discussions, I am not able to say more at this stage other than any transaction will have to meet certain financial parameters. These include Telstra’s financial investment being the minor economic portion of the overall transaction, with all other capital being resourced on a non-recourse basis,” said Penn.

Telstra asked Digicel’s founder, Irish billionaire Denis O’Brien, to sit on the board of the company and for revenue forecasts to be underwritten for three years as part of the terms of the deal.

Digicel founder Denis O’Brien (File photo)

The pacific operations of Digicel comprise its businesses in Papua New Guinea, Fiji, Samoa, Vanuatu, and Tahiti, where it is the biggest mobile carrier in these Pacific states. Digicel has been trying to offload its Pacific operations in an effort to pay off its multi-billion-dollar debt to bondholders.

Digicel Pacific is the least indebted part of the wider group. Digicel hired Citigroup late last year to advise on a possible sale of its Pacific business, after receiving a number of unsolicited approaches for the unit. Telstra, which last month confirmed its interest in the business, has tabled a bid valued at €1.25 billion that would be backed with a loan from the Australian Government.

The Digicel global headquarters in Kingston, Jamaica. (File photo)

According to an Irish Times report, the Australian Government’s involvement in the purchase is being widely seen as a move to block China’s influence in the region. Last year Digicel denied an Australian newspaper report that it was considering a sale of its Pacific business to Chinese-owned telco operators. China Mobile and ZTE are also reportedly interested in buying Digicel Pacific, which has 3G and 4G mobile phone networks and access to undersea cables.