Telstra share price higher on Digicel Pacific acquisition completion

Telstra has completed an acquisition…

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Key points

  • Telstra has completed a major acquisition
  • It has acquired Digicel Pacific for US$1.6 billion
  • However, Telstra will only pay US$270 million, with the Australian government paying the balance

The Telstra Corporation Ltd (ASX: TLS) share price is on the move on Thursday morning.

At the time of writing, the telco giant's shares are up slightly to $3.91.

Why is the Telstra share price rising?

Investors have been bidding the Telstra share price higher in response to the release of an announcement this morning.

According to the release, following receipt of all necessary government and regulatory approvals, Telstra has completed the acquisition of Digicel Pacific.

Digicel Pacific is the leading provider of communications services across Papua New Guinea, Fiji, Nauru, Samoa, Tonga and Vanuatu. At the last count, the company had around 2.8 million subscribers and generated US$466 million in service revenue from them during the financial year ended 31 March 2022.

How much is Telstra paying?

While the acquisition of Digicel Pacific will cost a total of US$1.6 billion, Telstra will only be contributing US$270 million. The remaining US$1.33 billion is being covered by the Australian Government through Export Finance Australia via a combination of non-recourse debt facilities and equity like securities.

Despite this, Telstra will own 100% of the ordinary equity in Digicel Pacific.

The telco giant also notes that it is expecting Digicel Pacific depreciation and amortisation, including purchase price amortisation arising from the transaction, of around US$160 million per annum.

Management commentary

Telstra's CEO, Andrew Penn was pleased with the acquisition.

We are very pleased the deal has completed and we welcome Digicel Pacific to the Telstra family. We have been working closely with Pacific Governments on this acquisition and we'd like to thank them for their cooperation and support. We look forward to continuing to work with them as we operate Digicel Pacific and strengthen our relationships in the region.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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