Telenet pampers shareholders with a substantial dividend

Telenet pampers shareholders with a substantial dividend
Telenet pampers shareholders with a substantial dividend

The telecom and media company does not only engage in customer loyalty. The shareholders can count on a dividend of at least (gross) 2.75 euros in the coming years. That is considerably more than expected.

Telenet can look back on a good quarter. Broadband accounted for 10,000 new customers (most of them private individuals), mobile (postpaid) 21,700 and the all-in bundles Wigo and Yugo attracted 22,400 additional subscribers.

On the other hand, 13,000 customers canceled their cable television. In the past nine months, Telenet has seen 35,000 customers switch to competitors. Fixed voice lost 11,000 subscribers in the quarter, and 24,000 after nine months.

All this resulted in a turnover of 638 million euros, 2 million euros more than expected but 1.7 percent less than last year. Covid-19 depressed the revenues from business services, the advertising income of subsidiary De Vijver Media (Vier, Woestijnvis) and the sale of smartphones.

2.6 million

Telenet injected 2.6 million euros extra into discounts and advertising in the past quarter.

Gross operating profit was EUR 343 million (-5%) below expectations. This is due to the 13 percent higher sales and marketing costs, which amount to 23 million euros.

Telenet attracted a lot of new customers, but because of the fierce competition from Proximus

and especially Orange Belgium

it had to dig deeper into its pouch for that. For example, Telenet spread student discounts for broadband.

The 113 million euros net profit – always a difficult to predict indicator – went wild over the consensus of 88 million euros.

The Mechelen company with American main shareholder (Liberty Global) is slightly raising its annual forecast for gross operating profit: from 1 percent to stable. The other outlook remains: 2 percent less turnover and a growth of the operational free cash flow of 1 to 2 percent.

Dividendvloer

More than the results, investors and analysts looked forward to an update on the dividend policy. CEO John Porter does not disappoint them, after he gave the stock market a big wink last summer.

Porter chops Boutin

With a dividend of (gross) 2.75 euros at a closing price of 32.7 euros (Wednesday), Telenet offers a dividend yield of 8.4 percent.

“The aim is clearly to attract value investors,” said ING analyst David Vagman.

Rival Proximus comes with a dividend of 1.2 euros at the closing price of 15.34 euros at a yield of 7.8 percent.

Or how Telenet CEO John Porter steals divend share status from Guillaume Boutin, CEO of Proximus.

The CEO replaces the payment of 50 to 70 percent of the annual free cash flow with a ‘dividend threshold’, say a minimum insured dividend. The shareholders can count on a gross amount of 2.75 euros in the coming years.

That lower limit will not be jeopardized should Telenet take over its Walloon counterpart Voo or invest in fiber optics together with Fluvius – the two are in exclusive discussions about this.

The 2.75 euro is at the top of the previous 50-70% principle. And considerably more than expected, analysts hoped for 2.20 euros.

For this financial year, the payment will be divided nicely into two: EUR 1.375 at the end of this year and EUR 1.375 in May next year.

Investment recouped

“This dividend puts us at the forefront of cable companies,” Porter patted himself during the analyst call. It has nevertheless taken Telenet more than twenty years since its inception to pay a regular dividend, at the end of 2019.

Which is not to say that the company did not reward its shareholders for this. In the early years after the IPO in 2005, this was done generously by means of capital reductions, whereby the ficus does not withhold any withholding tax. There was a pause between 2014 and 2018 because Telenet kept the cash in its pocket for the acquisition and integration of mobile operator BASE.

All in all, the Telenet shareholder has nothing to complain about. Those who paid 21 euros per share at the IPO (2005) have already more than earned back that investment thanks to the flow of distributions. Since 2007, the shareholder has received (gross) EUR 32.55 per share in capital reductions and dividends.

No penalty

Telenet does not have to pay Orange Belgium a penalty of 250,000 euros. The attachment judge has decided that. Orange is examining whether to appeal against the decision.

Orange had demanded that sum because Telenet is not complying with the judgment of the court of appeal.

The case goes back to 2018. Orange went to court because, unlike Voo, Telenet does not allow Orange to offer its’ own ‘television channels – channels that are not in the cable companies’ offer. As a reminder, Orange leases the cable from Telenet and Voo to offer broadband and digital TV to its customers.

Orange was initially dismissed in the commercial court. The telecom company appealed and was proved right in the appeal court in April last year. “Telenet had violated regulatory obligations and abused its dominant position in the market,” it said.

The court obliged Telenet to provide the service within a month on reasonable terms, under penalty of a penalty of 2,500 euros per day of delay. Telenet has lodged an appeal in cassation against that judgment.

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