Digicel says Papua New Guinea’s ‘discriminatory’ tax could affect Australia’s purchase of Pacific mobile networks

Digicel Group Chairman and Founder Denis O’Brien reacts during the 2018 APEC CEO Summit in Port Moresby, Papua New Guinea, November 16, 2018. Fazry Ismail/Pool via REUTERS/

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SYDNEY, April 4 (Reuters) – Digicel Group said it is considering legal options after Papua New Guinea (PNG) imposed a $100 million tax that the telecoms firm says has potential “implications” for the planned sale. of A$2.1 billion ($1.57 billion) from the largest mobile network in the Pacific to Australia’s Telstra.

Telstra Corp Ltd (TLS.AX) said last October it would buy Jamaica-based Digicel’s Pacific operations in a deal largely funded by the Australian government, seen by observers as a way to block the growing Chinese influence in the region. Operations include 2.5 million mobile phone subscribers in PNG, Fiji, Vanuatu, Tonga, Samoa and Nauru.

Digicel’s Irish founder Denis O’Brien met PNG Prime Minister James Marape last week to try to resolve the matter, Digicel said in a statement emailed to Reuters on Monday.

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He said that a “new arbitrary company-specific tax” was introduced on March 25, which was “puzzling not only for Digicel, but also for the Papua New Guinean economy given the reputational and credit rating implications of this sudden tax, strange and unprecedented. “.

The law imposes a one-time tax liability on Digicel equivalent to some US$100mn with an additional US$14mn penalty for non-payment, the statement said.

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

“Digicel is now in discussions with the Papua New Guinea government and other relevant stakeholders,” the statement said.

Marape’s office did not immediately respond to a request for comment.

A Telstra spokesman said in an emailed statement that the PNG tax was a matter of the current owner of Digicel Pacific. In response to questions from Reuters, he said he was still awaiting regulatory approvals from PNG for the deal.

“Telstra’s acquisition of Digicel Pacific in association with the Australian government has not yet received all of its regulatory approvals and is not yet complete,” he said.

The tax was first flagged last November, when Papua New Guinea outlined its budget measures for 2022. Parliament was told Digicel owns 90% of the mobile voice and internet retail market.

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

($1 = 1.3358 Australian dollars)

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Information from Kirsty Needham; Edited by Kenneth Maxwell

Our standards: the Thomson Reuters Trust Principles.

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