Telstra to prioritise paying shareholders despite NBN, virus cost headwinds
Telstra has promised to try to maintain its dividend payouts shareholders despite increased costs due to pandemic and NBN.
Telstra says expensive costs associated with the NBN and the ongoing coronavirus pandemic will hurt the major telco’s earnings, but it will prioritise dividend payments to shareholders.
At its annual general meeting on Tuesday, the nation’s primary telecommunication provider said it is aware shareholders are concerned about future dividend payments being whittled down due to the economic downturn fuelled by COVID-19.
A number of large publicly-listed companies have decided not issue final dividends for the 2020 financial year to preserve capital while uncertainty lingers around the time frame of the economic recovery.
Telstra’s underlying earnings have been hit by around $200 million due to the recession and costs incurred with the rollout of the NBN across Australia.
Telstra chairman John Mullen said close to $6 billion in profit had been lost over the past decade primarily from the NBN rollout, but also lower intake from voice, SMS and global roaming revenues.
Mr Mullen said he and the board were “acutely ” aware of the anxiety shareholders were facing as to whether Telstra would be forced to slash dividend payments in light of the pandemic.
However, he said Telstra would try to maintain payments at current levels, even if the payout exceeded the company’s guidelines.
“The board clearly understands the importance of the dividend and if necessary is prepared to temporarily exceed our capital management framework principle of paying an ordinary dividend of 70 to 90 per cent of underlying earnings to maintain a 16 cents per share dividend,“ Mr Mullen said.
Telstra expects its current dividend policy can be maintained if underlying earnings (EBITDA) remain in the target band of $7.5 million and $8.5 million.
Mr Mullen said considerations of future dividend payments would be at the discretion of the board at a later date.
“Hopefully this clearly demonstrates the board’s commitment to doing all that it can responsibly do to maintain the current dividend and eventually increase it again over time,” he said.
The reassurance to investors comes as three of the telco’s executives take 10 per cent pay cuts as a result of cases of misconduct by employees at Telstra stores towards indigenous people.
It has previously been reported sales staff at some Telstra stores were selling phones to people who could not afford plan repayments and were specifically targeting vulnerable indigenous groups.
The executive pay cut included a 10 per cent swipe from chief executive Andy Penn’s annual salary, taking his pay packet to $758,000.
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