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Concerns over Chinese bid for Digicel

| Jamaica Observer

KINGSTON, JAMAICA - Speculation that mobile phone operator Digicel is considering selling the Papua New Guinea business considered the jewel in the financially troubled telecoms empire has sparked concern within PNG over Beijing's growing influence.

The Digicel conglomerate surprised many of its users in PNG by filing bankruptcy proceedings in May in Bermuda and the United States, where it owes billions of dollars to bond holders who invested in the company some years ago.

The Guardian last week reported that, for the 3.8 million Digicel users in PNG, there could be vast changes in the near future if the speculation is correct that China Mobile will bid to buy Digicel Pacific's assets.

PNG is one of Digicel's biggest success stories. Since its arrival in PNG in 2007 Digicel has dominated the market and invested heavily in infrastructure across the country.

In mid-May the Australian Financial Review reported that Australian security services were concerned that China Mobile, a state-owned telecommunications company, was planning to buy the PNG business – a report immediately and categorically denied by Digicel.

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 former prime minister Peter O'Neill signed on to China's Belt and Road Initiative, an ambitious program in which the China is bankrolling development of much-needed infrastructure across Asia and the Pacific.

However, there are concerns within PNG's ruling coalition about the growing influence of China in the country.

“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,” East Sepik governor Allan Bird, 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, adding, “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 at up to two billion kina, making it the group's single biggest asset.

However, KPMG warned it would take up to a year to sell.

“In Digicel's case, PNG has become the jewel in its crown,” said Institute of National Affairs executive director Paul Barker.

The Digicel group is crippled by a US$7.4-billion debt mountain – some of which attracts interest rates of over 9%.

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 reports.


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