Telstra nabs Digicel as Pacific Cold War rolls on

Telstra may have finalized its acquisition of Pacific islands operator Digicel, but the region's telecom Cold War has barely begun.

The Australian telco said in a stock exchange filing Thursday it had completed the $1.6 billion deal, announced last October, after receiving regulatory approval.

CEO Andrew Penn said the operator would continue as a stand-alone business in six countries including Papua New Guinea, Fiji and Nauru.

Telstra expects Digicel, the biggest operator in the region with 2.8 million subscribers and $466 million in revenue, to contribute EBITDA of around $160 million annually.

What makes it an even better deal is that it was 80% paid for by the Australian government (see Telstra snaps up Digicel with $1.3B government assist).

Figure 1: Telstra expects Digicel to contribute EBITDA of around $160 million annually.
(Source: sammy/Alamy Stock Photo)

Welcoming the acquisition, Australian Foreign Minister Penny Wong said it "reflects our commitment to help build a stronger Pacific family through investment in high-quality infrastructure."

She no doubt means it, but for the lead investor, network-building is nowhere as important as heading off the Chinese.

As it happened, no Chinese telco made a play for Digicel, and there's no sign any were even thinking about it – but that merely underlines the priority the US and allies have placed on preserving control of the Pacific telecoms domain.

Digicel is just one of a series of skirmishes in a new Cold War unfolding around Pacific infrastructure.

US upper hand

It's fair to say the US has had the upper hand, keeping Chinese firms out of a number of subsea cables, including the huge trans-Pacific cable to Chile (see US is winning the Pacific cable wars).

China hasn't taken these lying down, though. In its latest move, it has tried to woo the Pacific states with a security and economic deal known as the Common Development Vision.

But it's been rejected in part because of concerns about ceding control of telecom networks to Chinese interests.

In a letter to other leaders opposing the deal, David Panuelo, President of the Federated States of Micronesia (FSM), accused China of wanting to carry out mass surveillance on Pacific nations.

"The Common Development Vision seeks Chinese control and ownership of our communications infrastructure, as well as customs and quarantine infrastructure ... for the purpose of biodata collection and mass surveillance of those residing in, entering, and leaving our islands, ostensibly to occur in part through cybersecurity partnership."

He claimed that Chinese research vessels in FSM waters were mostly following the paths of subsea cables and said he believed the agreement would open Pacific countries "to having our phone calls and emails intercepted and overheard."

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Only half the Pacific nations voted for the security deal, which effectively killed it – for now. But the competition for control over Pacific infrastructure and cybersecurity continues.

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— Robert Clark, contributing editor, special to Light Reading