Telstra called in to block Chinese bid

 THE Australian government has approached Telstra Corporation Ltd and other commercial businesses to sound out their interest in potentially taking an ownership stake in the Pacific operations of a telecommunications business to block China from buying the assets.


Telstra, Australia’s largest telecommunications company with 18.8 million subscribers as of 2020, launched 5G in May 2020.

The national security committee of cabinet has been considering the implications of Digicel, including its Papua New Guinea (PNG) assets, potentially being sold to a Chinese entity.

Digicel has telco assets in the Pacific and Caribbean.

It has considered injecting taxpayer financing for a private sector-led bid under the government’s “Pacific Step-up” strategy, sources said.

National security officials in Canberra are concerned Digicel’s mobile phone networks could be used to spy on Australia’s closest geographical neighbours, access sensitive data and disrupt activity in countries including PNG, Fiji, Tonga, Vanuatu and Samoa.

Telstra chief executive Andy Penn was asked by The Australian Financial Review on Thursday if Telstra had spoken to the government about fulfilling a “patriotic duty” to be part of a bid as a joint venture partner or operator to stop Digicel falling into Chinese ownership.

“I think that is really a question you should direct at the government,” he said at the National Press Club in Melbourne.

Sources said the government had approached a range of private companies and investors about potential involvement, including Telstra.

There is no suggestion Telstra has active interest in acquiring the Digicel assets in the developing countries, but the government’s sounding out of possible private sector partners underlines its national security and geopolitical interest in Digicel.

Australian private equity company Pacific Equity Partners held discussions with Digicel representatives last year, but the parties were a long way apart on a potential sale price. PNG’s National Executive Council has considered if its government-owned Telikom PNG or PNG DataCo could be part of a consortium to buy the Digicel assets, according to a PNG source.

Digicel’s major shareholder is Irish billionaire Denis O’Brien who is an experienced negotiator. – Financial Review


The political tension between Australia and China is viewed by observers as a prime opportunity to extract a higher government-subsidised bid to protect Digicel from its agitated bondholders.

Moreover, Chinese telco Huawei has already built the backbone of PNG’s broadband system, so the system is potentially already compromised.

O’Brien visited PNG last week. Australia’s International Development and the Pacific Minister Zed Seselja was also in the country at the same time.

Seselja’s spokeswoman said no meeting took place.

Morrison government ministers and national security officials have discussed options to possibly provide financial backing to private bidders from friendly nations.

Potential assistance options include subsidised loans, loan guarantees, underwriting currency risk or becoming a joint venture equity partner.

The Australia, US and Japan trilateral partnership for infrastructure investment in the Indo-Pacific, announced in 2018, is being touted as a potential vehicle to help facilitate a joint public-private investment.

The federal government’s export credit agency, Export Finance Australia, can provide loans and guarantees to Australian businesses for overseas infrastructure projects, including telecommunications, energy, electrification, water and sanitation, and transportation.

The government has a $2 billion Australian Infrastructure Financing Facility related to its Pacific Step-up plan to boost support for infrastructure development in Pacific countries – partly aimed at countering China’s creeping influence in the region.

The Coalition government already has been forced to spend almost $100 million to fund two-thirds of a 4,700km undersea cable from Australia to PNG and the Solomon Islands to stop Huawei from gaining a foothold in the Pacific.

Australia is also partnering with Japan and the US to finance about US$30 million for an undersea fibre optic cable to the Republic of Palau, an archipelago of more than 500 islands in the Micronesia region in the western Pacific Ocean. – FINANCIAL REVIEW


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