Digicel completes $1.6 billion Pacific unit sale

Businessman Denis O’Brien’s Digicel said on Thursday that it has completed the sale of its Pacific unit for an upfront payment of $1.6 billion (€1.6 billion), after it agreed to enter arbitration to resolve a surprise Papua New Guinea tax bill that landed after the deal was struck.

Digicel agreed last October to sell its Pacific unit to Melbourne-based telecoms company Telstra as it seeks to further reduce its debt burden, following a restructuring of borrowings in 2020 that saw bondholders write off $1.6 billion (€1.6 billion) of what they were owed. The company had a net debt pile of $5.8 billion (€5.8 billion) as of the end of March.

The Telstra deal, which is backed by funding from the Australian government, also involves a further $250 million (€250 million) consideration, subject to the business meeting certain earnings targets in the coming years.

Digicel warned in early April that the timing of its planned sale of the business, dominated by its Papua New Guinea (PNG) operation, could be affected by what it called a “new arbitrary, company-specific tax act” in PNG that had effectively landed it with a tax liability of about $100 million (€100 million).

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Digicel confirmed on Thursday that it and Papua New Guinea have agreed to enter a binding international arbitration process in Singapore to resolve the disputed one-time exit tax. The company has placed some $99.4 million (€99.4 million) in escrow, pending the outcome of the case.

The maximum $1.85 billion (€1.85 billion) value of the deal with Telstra equates to 8.3 times Digicel Pacific Limited’s earnings before interest, tax, depreciation and amortisation (ebitda) of about $222 million (€222 million) for the year to March 2021.

Digicel Pacific operates in six markets in the south Pacific – Papua New Guinea, Fiji, Samoa, Vanuatu, Tonga and Nauru. There will be no change to the Digicel brand in the six markets and the current management team will remain with the business.

“Having established our Pacific operations as a business start-up in 2005, we depart with enormous pride in a team that has made affordable best-in-class communications available to more than 10 million people across six of the most exciting economies in the region,” said Denis O’Brien, Digicel’s founder, owner and chairman.

Digicel is now focused on 25 markets across the Caribbean and Central America.