The Australian government is helping Australian telecom Telstra buy Digicel Pacific, the largest telecommunications company in the Pacific, in a $ 2.1 billion ($ 1.6 billion) deal announced Monday. And while Australian taxpayers generally pay the bills, this deal is more than money. It is about ensuring that China does not gain a foothold in the communication infrastructure of the Pacific island states, according to an Australian foreigner policy expert.
The Australian government is providing $ 1.9 billion for a new $ 2.1 billion deal, while Telstra is contributing only $ 360 million. Despite incredibly poor funding, Telstra will hold all equity, according to Australia ABC News.
Digicel Pacific is a subsidiary of Digicel, founded by Irish billionaire Denis O’Brien in 2001, which also has a large presence in Carib island nations. Digicel Pacific operates in six South Pacific countries, including Fiji, Nauru, Papua New Guinea, Samoa, Tonga and Vanuatu. The company is heavily dependent on Huawei’s 4G infrastructure in the Pacific and has not yet switched to 5G.
China Mobile has previously expressed interest in buying Digicel Pacific, which has put a lot of pressure on the Australian government to keep Chinese telecom companies out of the region, even if Australians have not yet acknowledged it. A spokesman for the Australian Ministry of Foreign Affairs and Trade did not comment to Gizmod according to press time, but denied to Australian newspapers that the agreement had anything to do with opposing China, speaking, “this is not about any other country.”
But that’s not how experts in the region see it. In fact, the deal only makes sense if you approach it from a New Cold War perspective.
“Australian companies have withdrawn to the Pacific,” Jonathan Pryke, director of the Pacific Islands program at Australia’s Lowy Institute, told Gizmodo by phone. “But Australia is now strengthening one’s own engagement. ”
“In the 5G world, financial services and infrastructure like electricity are all connected,” Prkye explained.
If China had control over telecommunications capabilities in the South Pacific, “it would give China access to information, but also a‘ finger over the switch ’to disrupt these economies,” Prkye said.
Those same worries about “finger over the switch” kept Chinese companies as Huawei from bidding for lucrative telecommunications infrastructure contracts in the US In a potentially worst-case scenario, US policymakers are reluctant to give Chinese companies the ability to turn lights on and off – both figuratively and literally.
As it is Sydney Morning Herald notes that China has spent billions in recent years on infrastructure projects in the South Pacific:
While Australia has long been the dominant provider of foreign aid in the region, Beijing has led the way in providing cheap loans for infrastructure projects. China was responsible for 37 percent of all donor loans to the Pacific between 2011 and 2017, financing projects totaling about $ 1.7 billion.
But ask Pryke to explain, the deal to buy Digicel Pacific is bigger than any given Australian-funded foreign aid project in any single years. And while the government certainly hopes to make some money on this business, it is worth much more through the projection of economic and cultural power.
“If you want to understand the geostrategic implications, look at World War II,” Pryke told Gizmodo.
The United States and its allies, including Australia, used the islands in the South Pacific to transport troops and supplies during World War II to fight Imperial Japan. These same 14 states and territories that make up the major island nations of the South Pacific would be equally instrumental in waging any hypothetical battles against China and its allies if the New Cold War ever flared up.
In the end, Pryke is not against the contract for Digicel Pacific, but it obviously has its reservations about what it means for the future if ordinary Australians pay for all this.
“I am an optimist, but it is not without risk for Australian taxpayers,” said Prake.
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