Telenor Increases Dividend Payout After Raising Net Debt Limits
Telenor ASA (TEL), the largest telephone company in the Nordic region, plans to raise the proportion of its dividend payout while increasing its net debt limits.
Telenor will distribute between 50 percent and 80 percent of net income, compared with a previous range of 40 percent to 60 percent, Chief Executive Officer Jon Fredrik Baksaas said at an investor meeting at the company’s headquarters in Fornebu, Norway. The company will also increase its debt ratio to two times earnings.
Telenor needs to squeeze costs out of operations in mature and emerging economies to revive returns to shareholders. It skipped a dividend for 2009 to fund the rollout of service in India, where the company is building a presence in a market with more than a dozen rivals.
“The increase in the dividend is a step in the right direction,” Robin Bienenstock, an analyst at Sanford C. Bernstein & Co., said by e-mail today. “But the increase in net debt targets -- in the absence of a major share buyback program or some other return to shareholders -- has to increase the risk of an acquisition and we do not think that’s a good thing.”
Telenor will be “disciplined” and “selective” in its approach to mergers and acquisitions, it said today in a presentation.
The company signed a network-sharing agreement in Denmark in June with rival TeliaSonera AB as the country’s market consolidated with TDC A/S acquiring Onfone. Telenor is also sharing a new 4G-technology mobile network in Sweden with Tele2 AB. Tele2 agreed in July to buy a 67 percent stake in Network Norway, helping consolidate Telenor’s home market.
Telenor entered India in December 2009 after setting up successful units in Pakistan and Bangladesh. Shareholders have complained that the entry was too late as rivals such as Bharti Airtel Ltd. pulled down prices to squeeze out new entrants such as Telenor. Uninor’s cumulative operating losses totalled 8.5 billion kroner ($1.5 billion) as of June 30.
Telenor reiterated Uninor’s financial targets today. It said “peak funding” will be within 155 billion rupees ($3.2 billion) and the unit will achieve break-even in operating cash flow about five years after starting operations. Uninor will break even at the level of earnings before interest, taxes, depreciation and amortization about three years after the brand’s introduction, Telenor said.
Uninor served 21.4 million customers with an average revenue per user of 12 kroner at the end of the second quarter. India’s wireless industry had 852 million subscribers in June, according to country’s telecommunications regulator, compared with 562 million when Uninor opened for business.
To contact the reporter on this story: Diana ben-Aaron in Helsinki at firstname.lastname@example.org