Telstra is partnering with the Australian government on the deal, with Telstra contributing $270 million and the Government, through Export Finance Australia, to contribute $1.33 billion.
The deal is inclusive of a three year, $250 million earn-out and the Government will also provide Telstra with strategic risk management support with Telstra to own 100% of the ordinary equity.
"This is a unique and very attractive commercial opportunity for us," said Andrew Penn, CEO of Telstra in a recorded video message. "Digicel Pacific is the number one telco in Papua New Guinea, Nauru, Samoa, Tonga and Vanuatu and it’s the number two in Fiji. Their 1,700 employees support around 2.5 million subscribers from retail customers through to large enterprises."
"Beyond the economics of the deal, the business aligns with Telstra's core strengths and our decades of experience in providing international connectivity in the Pacific region. This will also strengthen our role in as a provider of international voice and data and ICT services to the region," he continued.
"This deal is a win for our shareholders and important milestone in Telstra's relationship with the Australian government. When the transaction ultimately completes, which we expect to be sometime in the next three to six months, Digicel Pacific will be run as separate business within our international division."
In addition, Digicel Pacific has recorded sales of approximately $450 million and Adjusted EBITDA of approximately $222 million for the year ended 31 March 2021. with a relatively high EBITDA margin of 54%.
Once completed Digicel will have no operational responsibility for Digicel Pacific's operations it will however provide customary transition services for a short period of time.
There will also be no change to the Digicel brand in the six markets in which it operates with the existing Digicel Pacific management team to remain with the company. At the same time Denis O'Brien will join the Board of Directors of the newly formed holding company for Digital Pacific to assist in a seamless transition.
"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," said Denis O'Brien, founder and chairman of Digicel.
"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 (Digicel Pacific). From a Digicel perspective, today marks a very successful realisation of a strategic investment following our entry in the South Pacific in 2006."
The transaction, which is subject to customary government and regulatory approvals, is due complete in the first quarter of 2022.
