(JAMAICA OBSERVER) — Major changes are coming to the operations of regional telecommunications giant Digicel, which has entered into a joint venture agreement in the French Caribbean and is reportedly considering selling its Papua New Guinea business.
These changes come at the Jamaican-based telecoms provider, owned by Irish billionaire Denis O’Brien, appears to be buckling under massive debts, attempting to restructure US$1.6 billion of its estimated US$7-billion debt.
The agreement, which was initially announced by Digicel on February 25 at its third-quarter earnings call, will see the company “monetising its significant network assets across five countries in the French West Indies region — Martinique, Guadeloupe, French Guiana, St Martin and St Barts — while lliad benefits from a solution to launch its mobile services”.
FUTURE OPERATIONAL INVESTMENTS
The agreement is subject to the required regulatory approvals.
Commenting on the agreement, Digicel Group CEO Jean-Yves Charlier says “a joint venture of this nature is a first for Digicel and allows us to accelerate our digital ambitions. We are delighted to be partnering with a world-class telecom operator in Iliad and to be sharing a common vision of jointly building one of the most extensive networks across the French West Indies”.
CONCERNS GROW OVER CHINESE BID FOR PNG BUSINESS
Speculation that mobile phone operator Digicel is considering selling the Papua New Guinea (PNG) business that is considered the jewel in the financially troubled telecoms empire has sparked some concern within the country over Beijing’s growing influence in PNG.
The UK Guardian last week reported that for the 3.8 million Digicel users in Papua New Guinea there could be vast changes in the near future if the speculation that China Mobile will bid to buy Digicel Pacific’s assets is correct.
PNG is one of Digicel’s biggest success stories. Since its arrival in 2007 Digicel has dominated the market and invested heavily in infrastructure across the country.
If China Mobile were to buy Digicel PNG, it would inherit a large network connecting much of rural PNG, where the Chinese Government is also funding the construction of strategic transport infrastructure.
In 2018 the country’s former Prime Minister Peter O’Neill signed on to China’s Belt and Road Initiative, an ambitious programme in which the Chinese Government is bankrolling development of much-needed infrastructure across Asia and the Pacific.
“The Chinese have serious credibility issues here in PNG and any more association with Chinese companies will not be a step in the right direction for PNG,” Allan Bird, the governor of East Sepik, one of the country’s largest provinces, told the Guardian.
“China has always been sniffing for an opportunity; this just happens to be a potential one,” said Ali Kasokason, a political commentator who lives in Port Moresby. He added, “Digicel or not, China is quite aggressive in entering the communications sector in the Pacific.”
Documents filed with the court show accounting firm KPMG valued Digicel Pacific – the company through which the group offers its services to PNG and other Pacific nations – at up to US$615 million, making it the group’s single biggest asset.
However, KPMG warned it would take up to a year to sell Digicel Pacific.
“In Digicel’s case PNG has become the jewel in its crown,” said PNG Institute of National Affairs Executive Director Paul Barker. Digicel is crippled by a US$7.4-billion debt mountain – some of which attracts interest rates north of nine per cent.
Despite making a profit of US$480 million off revenue of US$2.3 billion last year, the debts are “unsustainable” due to soaring interest bills, the Guardian reported.