Australian telecoms giant Telstra and the Australian government are buying Pacific Telecoms in a joint venture.
It is seen as a blockade to China’s regional influence.
Telstra called the A$2.1bn ($1.6bn; £1.2bn) deal a “unique and very attractive commercial opportunity to boost our presence in the region”.
Digicel Pacific has 1,700 employees in Papua New Guinea and Fiji.
For months, speculation has focused on the company’s future.
Digicel refuted a claim last year that it was discussing selling its Pacific unit to China Mobile.
Telstra claims that an Australian government approached Telstra to provide technical assistance in connection to Digicel Pacific, which Telstra says is crucial to regional telecommunications.
Telstra stated that the government agreed to fund the majority of the bid.
Analysts believe the company could be attractive to China if it sought to establish greater authority within the region.
Jonathan Pryke from the Lowy Institute (a think tank based in Sydney) stated that Digicel is the dominant player in Pacific, and Australia views it as an asset they cannot let fall to China.
They are determined to bring back Australian businesses to the Pacific, but they have come to realize that they will need to sub-scribing.”
According to newswire Reuters, a spokesperson from Australia’s Department of Foreign Affairs and Trade said that the partnership on infrastructure development was a critical part of their Pacific step-up.
Australia is increasing its presence in Pacific amid rising tensions with China.
It includes a $1.5bn allocation to infrastructure projects in the area, as well as membership of the Quad group with Japan, India, and the US as well the Aukus security agreement with the UK.
- Australia’s gamble on China over the US
The company also substantially funded the 4,700km (or 2,900-mile) Coral Sea Cable in 2018, to prevent Chinese telecoms giant Huawei Technologies from placing it.
The fund is now financing an underwater optic fiber cable to Palau.
Washington has been concerned for years about Chinese interference in telecommunications networks.
Many countries, including Australia, have now banned Huawei and Chinese-owned companies from providing 5G and phone lines.
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