Australian phone giant Telstra is reported to have made a $2 billion (€1.7 billion) bid for Digicel's Pacific operations.
A potential deal for the Pacific islands business of Denis O’Brien’s telecoms group has been on the cards for months, but Covid-19 travel restrictions across the region have made it difficult for suitors to carry out site visits.
Former state-owned monopoly Telstra has reportedly asked Mr O’Brien to sit on the board of the company. It also wants future revenue forecasts to be underwritten for three years as part of the deal. Digicel declined to comment on the report.
Reports from Australia said that more than $1.5 billion of taxpayer money could go to funding the deal amid concerns that a Chinese company could take control of the assets.
Strategic business
On a recent earnings call, Digicel told bondholders that it views Digicel Pacific as a “highly attractive and strategic business” and is “very comfortable with its current performance and status”.
It also said it would not be commenting further on unsolicited approaches received in respect of its Pacific operations other than in the case of a notifiable event.
Digicel hired Citigroup late last year to advise on a possible sale of the Pacific business, spanning Papua New Guinea to Fiji, Samoa, Vanuatu, Tonga and Nauru, after receiving a number of unsolicited approaches for the unit.
Industry sources said at the time that the business could be worth about $2 billion (€1.65 billion) based on its division’s earnings before interest, tax, depreciation and amortisation (Ebitda) of $230 million for year to March 2020.
Telecoms companies are currently valued at an average of eight to 10 times Ebitda.
Digicel Pacific is the least indebted part of the wider group which convinced bondholders last year to write off $1.6 billion of debt to bring borrowings down to a more sustainable level of about $5.3 billion.
A liquidation analysis by KPMG for Digicel before the debt restructuring talks started in April last year indicated that Digicel Pacific was the only part of the empire that would raise money in a wind-up scenario. It concluded that the unit's assets could generate up to $615.2 million in a fire sale. A sale of Digicel Pacific would further reduce Digicel's remaining debt.
