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It was the Aussies who drove PNG to drink

Oz sweats to keep Pacific telcos from China

DigiCHRIS DUCKETT
| ZDNet | Edited extracts

SYDNEY - Australia is funding the potential purchase of a Pacific telco for only one reason, to ensure China Mobile doesn't get to it first.

It now appears Australia wants a crack at showing the world how to keep companies out of Chinese ownership.

If we rewind to 2018, Australia used around A$200 million (K520 million) of its foreign aid budget to lock Huawei out of building a subsea cable to the Solomon Islands and Papua New Guinea.

Instead of Huawei, local telco Vocus eventually picked up a K355 million contract to build the cable.

That might work for one-off projects, but for the Pacific arm of bankrupt telco, Digicel, another model would be needed.

China Mobile is said to be circling Digicel, which is reportedly swimming in around K18 billion of debt with yearly revenue of K6 billion.

Enter Australia's largest telco, Telstra, which confirmed last week it was approached by the Australian government regarding a Digicel deal.

The government is set to stump up significant funding for any transaction.

Canberra has decided it needs to put its money where its increasingly large mouth is.

While Telstra was mute on the details, the ABC put the deal at around A$2 billion K5 billion), including Canberra lending Telstra A$1.5 billion at reduced rates that would net Australia about A$30 million (K80 million) a year in interest.

Digicel Pacific has networks in Papua New Guinea, Fiji, Nauru, Samoa, Tonga, and Vanuatu.

There is a delicious irony in the Australian government helping Telstra, which it privatised last century to fund the purchase of another operator.

But Canberra has few other options. Optus is owned by the Singaporean government, TPG has offshore Vodafone and Hutchison ownership entanglements, and the likes of Vocus are too small.

We are currently at the stage where fighters are circling each other, not throwing punches.

"This is a must do thing as we don't want our neighbouring countries' critical infrastructure to be controlled by other countries that might have other intentions," a Monash University criminology lecturer told ZDNet.

"Critical infrastructure protection is now essential to national security. It is important that individual countries can understand that the service provider they are using has no hidden agenda that is malicious."

If Telstra does win out, it should invest in its purchase and maintain its Australian reputation as having the best coverage.

The problem now for governments like Australia, especially if they want to continue to engage in this sort of activity, is they will have to avoid being milked by companies looking to sell infrastructure that could be deemed critical.

Chris Duckett is the Australian Editor of ZDNet

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