In a joint venture, the Australian government and Telstra will purchase a Pacific telecoms business.
The decision is being considered as a political stumbling block to China’s regional dominance.
The A$2.1 billion ($1.6 billion; £1.2 billion) purchase was described by Telstra as a “unique and extremely compelling commercial opportunity to strengthen our footprint in the area.”
In Papua New Guinea, Fiji, Samoa, Vanuatu, and Tahiti, Digicel Pacific employs 1,700 employees.
For months, the company’s future has been the subject of conjecture.
Digicel refuted a story last year that it was in discussions to sell its Pacific division to China Mobile, which is owned by the Chinese government.
The Australian government contacted Telstra “to give technical advice in regard to Digicel Pacific,” which is “important to telecommunications in the area,” according to Telstra.
According to Telstra, the government agreed to fund the majority of the offer.
A Smart Business Move
Analysts believe the corporation would be appealing to China if it wanted to establish more control in the area.
“Digicel is the dominant player in the Pacific, and Australia views it as a strategic asset that it cannot afford to lose to China,” said Jonathan Pryke of the Lowy Institute in Sydney.
“They want to get Australian company back into the Pacific, and they’ve realized they’ll have to underwrite.”
“Partnering on infrastructure development is a critical aspect of our Pacific step-up,” an Australian Department of Foreign Affairs and Trade spokeswoman told newswire Reuters.
Australia has increased its footprint in the Pacific as tensions with China have risen.
This includes contributing $1.5 billion to infrastructure projects in the area, as well as joining the Quad group, which includes the United States, India, and Japan, and the Aukus security pact, which includes the United States and the United Kingdom.
In 2018, it also partially sponsored a 4,700-kilometer (2,900-mile) Coral Sea cable to prevent Huawei Technologies from laying it.
It is also assisting Palau in the financing of an underwater optical fiber connection.
Control of telecommunications networks by China has long been a source of worry for the United States and its allies.
As a result, numerous nations, including the United States, the United Kingdom, and Australia, have banned Huawei and other Chinese corporations from supplying phone lines and 5G networks.