Telstra bows to pressure over dividend

21 Jun 2004

Telstra Corp has seen its credit rating fall as a result of its decision to bow to investor pressure and pay out AUD1.5 billion (USD1.03 billion) a year for the next three years in special dividends. The telco’s stock rose almost five percent following its announcement that it plans to borrow AUD1 billion for the 2004/05 capital return as part of a three year program that will also see it increase its dividend payout from 60% to around 80% of net profit. Telstra said that the program will not impinge upon its plans to spend around AUD500 million on acquisitions in the coming fiscal year. Following the announcement, Standard & Poor’s cut the telco’s credit rating to A-plus/A1.

Meanwhile, the group’s New Zealand subsidiary TelstraClear is engaged in talks with a number of local utilities companies, including electricity provider Vector, about forming a possible alliance. The negotiations come hot on the heels of a decision by the government to block the rivals of Telecom New Zealand from accessing the incumbent’s network. TelstraClear MD Rosemary Howard confirmed that the company is ‘looking at the possibility of fibre rollout with some of the electricity companies.’