Death of Bougainville patriot Reuben Siara
Bribery makes the Pacific’s wheels go round

$1.6b handout to Telstra to head off Chinese

Telstra CEO Andy Penn (AAP  David Crosling)
Telstra CEO Andy Penn - soon to be the proud owner of Digicel Pacific (Photo - David Crosling, AAP)

| Michael West Media | Extracts

GOLD COAST - Why was Telstra slotted $1.6 billion (K4 billion) by Australia’s Morrison government to buy Digicel, and how is it Telstra shares slumped by one-third during the bull market?

It’s corporate welfare on steroids. Another bizarre intervention in what Scott Morrison and treasurer Josh Frydenberg like to call free markets.

Yet, according to some analysts, Telstra’s CEO Andrew Penn has done ‘the deal of the decade’ to buy Digicel, a Pacific telecommunications company; with more than a little help from his friends in the Australian government.

Digicel’s owner, Irish billionaire Denis O’Brien, put the business up for sale to reduce his sizeable debt.

To combat the threat of Chinese expansion in the Pacific region, the Australian government decided to step in to protect our ‘strategic interests’ and asked Telstra to buy it.

The government (and US president Joe Biden) wanted to make sure that such a vital asset did not get into the hands of the Chinese.

The fear was that it could allow the Chinese to use the telecommunications infrastructure to spy in Fiji, Papua New Guinea, Nauru, Samoa, Tonga and Vanuatu where Digicel has its operations.

They were so afraid that they forked up $960 million in export finance to help Telstra fund the deal, and threw in another $810 million in non-voting equity; effectively taking the brunt of the financial risk away from Telstra.

All Telstra had to do was put up $360 million (K900 million) in equity. The way the deal is structured, it will get that back in (guaranteed) dividends in less than six years.

Looks like a great deal for Andy Penn’s Telstra and its long suffering shareholders.

Denis O’Brien should be happy, too, with the Australian government helping him to pay off $2.1 billion, roughly half his debt.

As for Australian taxpayers, who cares? Same goes for the rest of the Australian telecommunications industry, who cares?

Or is SingTel Optus already angling for government help to fund some bold acquisitions of their own to protect Australia’s strategic interest? After all, the Chinese Belt and Road initiative has tentacles all over Asia.

After presiding over what was once one of Australia’s 10 largest companies for six years, Penn badly needed a win. As did his long suffering shareholders.

Penn was announced as the new CEO of Telstra in February 2015 when the Telstra share price was on a high of $6. It’s been mostly downhill since, with a low of $2.40 in mid-2018. It’s currently hovering around $3.80.

That’s a loss of 36% in market value during a period when the Australian Securities Exchange main index rose by 34%.

By contrast, Penn’s predecessor, David Thodey, saw the share price double during his tenure.

Where the Digicel deal fits into Penn’s strategy is unclear, but who cares? When the government comes calling with a helping hand and taxpayer funds, strategy is less important.


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Lindsay F Bond

Maybe not spying, the concern is of 'management', basically where normal conversation is informed by processes stripped of 'sundriness' of opinion.


If 'seditious' is the go-to epithet and 'conspiracy' is the corralling noun, the fibres of connection are paramount to clarity and to truth in discourse.

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