Digicel Group considers Pacific sale

Telecommunications company Digicel Group is reportedly considering the sale of its Pacific operations in Papua New Guinea, Fiji, Samoa, Vanuatu, Tonga and Nauru.

The Irish Times newspaper in Dublin has reported that the Carribean-headquartered company has received a number suitors for the least-indebted part of millionaire businessman Denis O'brien's business portfolio.

The newspaper reports that the Pacific unit of the Digicel Group could be worth about US$2 billion (€1.64 billion), according to industry sources, based off the division’s earnings before interest, tax, depreciation and amortisation (ebitda) of $230 million for year to the end of March.

A Digicel spokesman confirmed to the Irish Times that the Group has “received approaches from a number of parties in respect of its Pacific operations”, but he refused to give more information on the negotiations between the parties.

The move by the Digicel Group to consider offloading its Pacific portfolio comes on the back of a report in the Australian Financial Review last week of Chinese telecommunication firms China Mobile, Huawei and ZTE eyeing Digicel’s Pacific operations. 

The Australian newspaper said this includes the company’s business in Papua New Guinea, one of its top three markets, as well as Fiji, Samoa, Vanuatu Tonga and Nauru.

According to the Irish times, a liquidation analysis by global accounting firm KPMG for Digicel, before the group kicked off negotiations with bondholders on a distressed-debt restructuring deal earlier this year, showed that Digicel Pacific was the only part of Mr O'brien's empire that would raise money in a wind-up scenario. 

The analysis reportedly concluded that the unit’s assets could generate up to US$615.2 million in a firesale. Bondholders subsequently agreed to write off US$1.6 billion of what they are owed, in order to avoid larger losses in a liquidation scenario, which brought the Group’s net debt down to a more sustainable US$5.3 billion. 

The deal involved the debt investors swapping their notes for bonds of a lesser value, reports the Irish Times.

The KPMG report, the Irish Times added, showed that Digicel Pacific’s own debt stood at $87.5 million. However, the unit was subsequently used as a guarantor for some of the notes issued by a holding company at the top of the group as part of the bond-swap transaction.

A potential sale of the Digicel Pacific unit would most likely be used to further reduce the group’s debt burden and provide money for additional investment.

The Irish Times further reports that Digicel has spent more than $6 billion building telecoms networks and businesses across 32 markets in the Caribbean, Central America and Pacific over the past two decades. 

Mr O’Brien has reportedly taken at least US$1.9 billion of disclosed dividends out of the group between 2007 and 2015.

In a bid to ensure Digicel’s Pacific operations do not fall into the hands of a Chinese mobile company, the Australian Financial Review claims the Australian government may offer “financial support on national security grounds” – possibly by way of loans or loan guarantees – to Australian bidders eying the unit.

The Suva-based Digicel Regional Chief Executive Officer, Shally Jannif, has been contacted by the Samoa Observer for comment.

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