Telstra Options $1 Billion Buyback for Shareholders, First in 8 Years

For the first time in eight years, Telestra is offering their first annual dividend increase. Telstras’s chief executive David Thodey has announced a $1 billion share buyback for the company’s 1.4 million shareholders. Some were expecting a bigger buyback – closer to $2 billion – but for now, Australia’s largest telecommunications and media company is taking baby steps in regard to shareholder returns.

Historically, the board at Telstra has always been conservative in regards to capital management, and this release of funds doesn’t change that. Investors are actually relieved that Thodey is not just hoarding spare cash to spend on unspecified future deals in Asia.

This year, Telstra’s coffers are in the black big time, thanks to the 70 percent sale of its Sensis directories business for $454 million at the beginning of this year, and the 76.4 percent stake selloff in its Hong Kong mobile service business, CSL, for around $2 billion.

Besides the $1 billion share buyback, Telstra is also looking to invest a further $1 billion in its mobile network. The company has thrived under Thodey’s guidance, and has improved in its customer service in particular. Thodey has said the company’s improvements in this field has grown their customer base to around 16 million mobile customers, justifying the large investment in the network.

With optioning $1 billion to its shareholders, the company is able to make them happy and still retain its flexibility over potentially acquisitions and growth offshore. This is possible by their spending less on buyback through capital management initiatives.

As investor sentiment shifts from a focus on yield to a focus on having a steady growth plan in place, investors and experts are looking towards Telstra’s future options. Negotiations with the Australian government over the national broadband network continue, and some believe the company is close to closing a new deal to co-operate with the Abbott government’s revised broadband rollout. Overall, Telstra is in great shape, and has been meeting or beating expectations for a few years now.

Information sourced from The Australian Financial Review.