Orange Polska to Cut Dividend in 2016 Amid 4G Spectrum Buy

  • Move comes as carrier will pay 3.2 billion zloty for spectrum
  • Shares decline as third-quarter net income shrinks 21 percent

Poland’s biggest phone company plans to cut next year’s dividend payout by half as it faces billions of zloty of investments in high-speed mobile Internet. The shares slumped.

Orange Polska SA, which has offered to pay 3.2 billion zloty ($839 million) for 4G frequencies, said Wednesday in a statement that it intends to pay 0.25 zloty a share in 2016, compared with 0.5 zloty a piece returned to investors a year earlier. The carrier expects its ratio of net debt to earnings before interest, taxes, depreciation and amortization, or Ebitda, to rise to as much as 2.2 next year from 1.9 to 2 seen at the end of this year.

The company’s growing leverage “increases business risk and limits flexibility towards potential unexpected market turbulences,” Konrad Ksiezopolski, an analyst at Haitong Bank SA in Warsaw, said in a note, adding he kept his sell recommendation for the stock.

The former state monopoly needs the frequencies to provide high-speed Internet services in less-populated Polish regions and catch up with its competitors in central Europe’s largest market. The investment in bandwidth may help it stop a decline in revenue, which has shrunk every year since 2007.

Below Estimate

The purchase will boost Orange Polska’s share in the country’s high-speed mobile Internet band to 22 percent from the current 5 percent, Chief Financial Officer Maciej Nowohonski said at a press conference in Warsaw on Thursday. The price for the spectrum was below the company’s maximum estimate, he added, declining to give further details.

Orange Polska may consider sale of some non-strategic assets, Chief Executive Officer Bruno Duthoit said at the same meeting. The operator will present its new mid-term plan in February, he said.

The shares fell as much as 5.4 percent, before trading 4.3 percent lower at 6.98 zloty as of 3:25 p.m. in Warsaw. That values the Polish unit of France’s Orange SA at 9.2 billion zloty.

The company said it sees “incremental” investments to build the 4G network and roll out services at 220 million zloty through 2017 as it plans to finance reservation of the frequencies using new and existing loans from its parent. These will increase its LTE coverage to 99 percent of the population from current 80 percent.

Orange Polska also said Wednesday that its third-quarter net income declined 21 percent from a year earlier to 110 million zloty, matching estimates by eight analysts surveyed by Bloomberg. Sales fell to 2.97 billion zloty from 3.05 billion zloty.

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