Monday, 25 October 2021 11:22

Analyst Budde terms Telstra's Digicel move 'a political decision'

Paul Budde: "Telstra is better at operating in consolidating markets, so they are in a good position to continue the business." Paul Budde: "Telstra is better at operating in consolidating markets, so they are in a good position to continue the business." Supplied

Telstra's decision to acquire Digicel Pacific is a political decision, Australia's top independent telecommunications analyst Paul Budde says, adding that it would never have happened without the involvement of the government.

He described Digicel founder and chairman Denis O'Brien as "a builder, not a consolidator".

Telstra announced on Monday morning that it would be buying Digicel's business in the South Pacific region for US$1.6 billion (A$2.14 billion), plus an additional US$250 million depending on how the business fares over the next three years.

Said Budde: "Telstra is better at operating in consolidating markets, so they are in a good position to continue the business.

"Of course, there are limits to these markets, increased competition, low income countries and limited growth."

He said another challenge for Telstra would be to "not operate it from Melbourne, to keep it separate and independent. Keep it separate from the Telstra bureaucracy".

Telstra will have to spend a considerable sum removing gear made by the Chinese telecommunications equipment vendor Huawei Technologies from Digicel's networks if it wants to adhere to Australian Government policy as far as its new acquisition is concerned.

This is not the first time that Australia has intervened in telecommunications deals in the Pacific. Back in 2017, Canberra pressured the Solomon Islands to withdraw from an undersea cable project after Huawei was awarded the contract to build the cable.

The project was finally awarded to the Vocus Group, with Australia footing two-thirds of the bill, a sum of about $100 million.

O’Brien said in a statement: “Today’s announcement is a tremendous testament to our colleagues across Digicel Group and in particular, our 1700 staff in the Pacific.

"In 2006, we established a business in the South Pacific region that has helped democratise mobile communications and transform local economies and societies by making affordable best-in-class communications available to more than 10 million people across six of the most exciting markets in the South Pacific region.

“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.

“From a Digicel perspective, today marks a very successful realisation of a strategic investment following our entry in the South Pacific in 2006."

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Sam Varghese

Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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