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Telecommunication

Australian alliance eyes bid for Pacific telecom to block China

Jamaica-based Digicel's unit reportedly sought by China Mobile

Samoa's capital, Apia: Telecom Digicel Pacific holds a majority market share in the Pacific island nation.   © Reuters

SYDNEY -- The government of Australia looks to support a bid by domestic telecom Telstra to buy a leading South Pacific mobile phone business reportedly eyed by a Chinese suitor, as Canberra works to limit Beijing's influence in the region.

Telstra said Monday it is discussing a purchase of the Pacific operations of Jamaica-based Digicel "in partnership with the Australian government."

The Australian company said any such deal for Digicel Pacific "would be with financial and strategic risk management support from the government."

The government would pay for half of the purchase -- estimated by local media at 2 billion Australian dollars ($1.47 billion) -- with Telstra taking a minority stake if the transaction is completed, Reuters reports.

"The discussions are incomplete and there is no certainty that a transaction will proceed," Telstra also said.

Digicel, founded in Jamaica by Irish businessman Denis O'Brien, operates in the Caribbean, Central America and the South Pacific. It holds market shares of over 90% in Papua New Guinea and over 50% in Tonga, Vanuatu and Samoa.

Last year, Australian media reported that state-owned China Mobile was interested in buying Digicel Pacific. It also was reported that Australia was considering supporting a domestic fund through loan guarantees to fend off Beijing's advances.

Australia worries about the Chinese company gaining access to infrastructure in the South Pacific, as well as profits at Digicel being used for influencing regional lawmakers, said Shane McLeod, a research fellow at Australian think tank Lowy Institute.

China has been exerting influence over Pacific islands, raising security concerns among Australia and others with deep ties to the region such as Japan and the U.S. In particular, Chinese moves surrounding information infrastructure have raised a red flag.

Bids by three companies to build an undersea cable for Pacific islands, including a Chinese company's low bid, were invalidated earlier this year.

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