By Kirsty Needham

SYDNEY (Reuters) – Digicel Group mentioned it’s contemplating authorized choices after Papua New Guinea (PNG) imposed a $100 million tax that the telecoms agency mentioned has potential “implications” for the deliberate A$2.1 billion ($1.57 billion) sale of the Pacific’s greatest cell community to Australia’s Telstra (OTC:).

Telstra Corp Ltd mentioned final October it will purchase the Pacific operations of Jamaica-headquartered Digicel in a deal largely funded by the Australian authorities, seen by observers as a strategy to block China’s rising affect within the area. The operations embrace 2.5 million cell phone subscribers throughout PNG, Fiji, Vanuatu, Tonga, Samoa and Nauru.

Digicel’s Irish founder, Denis O’Brien, met with PNG Prime Minister James Marape final week to attempt to resolve the matter, Digicel mentioned in a press release emailed to Reuters on Monday.

It mentioned a “new arbitrary, company-specific tax” was launched on March 25, which was “perplexing not only for Digicel, but additionally for the Papua New Guinea financial system given the reputational and credit standing implications of this sudden, weird and unprecedented tax”. 

The act imposes a one-time tax legal responsibility on Digicel equal to about $100 million with an additional penalty of $14 million for non-payment, the assertion mentioned.

“This matter requires pressing decision given its implications for the sale of Digicel’s Pacific operations to Telstra but additionally given the knock-on penalties for all international direct funding exiting Papua New Guinea,” the assertion mentioned.

“Digicel is now engaged in discussions with the Papua New Guinea Authorities and different related stakeholders,” the assertion mentioned.

Marape’s workplace didn’t instantly reply to a request for remark.

A Telstra spokesman mentioned in an emailed assertion that the PNG tax was a matter for the present proprietor of Digicel Pacific. In response to Reuters’ questions it mentioned it was nonetheless awaiting PNG regulatory approvals for the deal.

“The acquisition of Digicel Pacific by Telstra in partnership with the Australian authorities has not but obtained all of its regulatory approvals and has not (been) accomplished but,” it mentioned.

The tax was first flagged final November, when Papua New Guinea outlined its 2022 Finances measures. Parliament was advised Digicel holds 90% of the retail cell voice and web market.

The tax applies solely to firms who management greater than 40% of PNG’s marketplace for telecommunications and banking. Financial institution of South Pacific, the one different firm affected, advised the Australian Inventory Change on Friday the tax got here into impact on March 25 and have to be paid yearly in September.

($1 = 1.3358 Australian {dollars})