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Could China take over Digicel PNG?

| Australian Financial Review | Extract

Link to the complete article here

SYDNEY - Mother nature seems to have designed Papua New Guinea for mobile phones.

A land of spectacular mountains, deep valleys and a sparse inland road system, PNG is dotted with 1500 mobile phone base stations, now used by sons and daughters in cities such as Port Moresby or Lae to check on whether parents living in remote highland villages are safe from the ravages of COVID-19.

According to well-placed industry sources, however, mobile traffic in PNG has plunged between 30-50% since the contagion struck.

This further imperils the operations of a western Pacific mobile business dominated by one company, Digicel, which is on a credit ventilator with $US6.7 billion (K23 billion) in debt and major repayment deadlines looming over the next 30 months.

Anticipating this corporate last card saloon, well-placed Australian business, political and intelligence sources are rife with speculation the Chinese are ready to swoop.

China Mobile has not so far launched a formal bid to take over Digicel’s assets in PNG, but has undertaken its own scoping study since the beginning of this year, according to the same well-placed sources, and its interest in acquiring the asset is an open secret in government circles in Port Moresby.

The strategic implications of a Chinese takeover of Digicel’s Pacific assets are significant.

In the words of one telecommunications veteran, it would mean “having the Chinese empire right next door” to Australia.

The words have been chosen more carefully, but the sentiment is similar in the Australian Department of Foreign Affairs and Trade statement in response to a series of e-mail questions from The Australian Financial Review: “We will continue to monitor this issue, given the importance of high quality, secure telecommunication services for our Pacific partners.”

It is just one element in a rapidly developing China and the Pacific story.

China’s ambitions in the region have ratcheted up dramatically in the past five years. During that time, it has expanded its territorial claims in the South China Sea, upgrading and militarising a series of reefs into islands, with landing strips and naval port facilities.

Meanwhile, rapidly rising China-Australia tensions over threatened punitive tariffs against Australian barley exports to China, cancelled beef imports from four Australian abattoirs and a potential tourist and student boycott mean the latest Digicel Pacific mobile sale issue could not have landed on the desks of Australian ministers at a more sensitive time….

A Chinese buyout of Digicel, should it occur, would come just two years after the Malcolm Turnbull-led Coalition government was forced to majority fund an undersea cable in the Pacific to stop it being built by Chinese firm Huawei.

The cable from the Solomon Islands and PNG to Sydney, cost $136 million, and was two-thirds funded by Australia's overseas aid program.

After blocking Huawei from participating in the NBN, the Turnbull government was worried China could use the undersea cable to gain a foothold in the Pacific and potentially spy on the region.

It later stopped Huawei from rolling out Australia's new 5G network.

The cable deal came at a time when the Turnbull government was embarking on its Pacific step-up and pushing back against Beijing's efforts to exert greater influence in the region – a step-up continued by Turnbull’s successor, Scott Morrison.

Meanwhile, Papua New Guinea's Telecommunications Minister, Timothy Masiu, says he is aware of Digicel's financial troubles but has not so far been informed about any deal with China Mobile.

"When we are officially told, we will formulate a position," he said via phone.

However, he indicated the government had limited avenues to block a Chinese takeover of the country's dominant mobile phone carrier. "It's a business deal," he said.


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