Digicel’s Pacific mobile networks deal threatened by ‘discriminatory’ new tax

The €91m tax has been described by Digicel as "sudden, bizarre and unprecedented tax”

Mon, 04 Apr, 2022 - 12:58

Digicel Group says it is considering legal options after Papua New Guinea (PNG) imposed a $100m (€91m) tax that the telecoms firm said had potential “implications” for the planned $1.57bn (€1.43bn) sale of the Pacific’s biggest mobile network to Australia’s Telstra.

Telstra Corp said last October that it would buy the Pacific operations of Digicel in a deal largely funded by the Australian government, seen by observers as a way to block China’s rising influence in the region. The operations include 2.5m mobile phone subscribers across PNG, Fiji, Vanuatu, Tonga, Samoa and Nauru.

Meeting

Digicel’s Irish founder, Denis O’Brien, met with the PNG prime minister, James Marape, last week to try to resolve the matter, Digicel said in a statement.

It said a “new, arbitrary, company-specific tax” was introduced on 25 March which was “perplexing not just for Digicel but also for the Papua New Guinea economy given the reputational and credit rating implications of this sudden, bizarre and unprecedented tax”.

The act imposed a one-time tax liability on Digicel equal to about $100m with a further penalty of $14m (€12.7m) for non-payment.

“This matter requires urgent resolution given its implications for the sale of Digicel’s Pacific operations to Telstra but also given the knock-on consequences for all foreign direct investment exiting Papua New Guinea,” the statement said.

“Digicel is now engaged in discussions with the Papua New Guinea government and other relevant stakeholders.” Marape’s office did not immediately respond to a request for comment.

A Telstra spokesman said in a statement that the PNG tax was a matter for the current owner of Digicel Pacific. It said it was still awaiting PNG regulatory approvals for the deal.

Flagged

The tax was first flagged last November when PNG outlined its 2022 budget measures. Parliament was told Digicel holds 90% of the retail mobile voice and internet market.

The tax applies only to companies that control more than 40% of PNG’s market for telecommunications and banking. Bank of South Pacific, the only other company affected, told the Australian Stock Exchange on Friday the tax came into effect on 25 March and must be paid annually in September.