Telstra outlines $1.5 billion capital management plan

Telco confirms it will return a large chunk of Autohome sale proceeds to shareholders.

Telstra has said it will detail a capital management program of at least $1.5 billion when it releases its full-year results on August 11.

The telco giant has been widely tipped to embark on a share buyback ever since it made a deal two weeks ago to offload its 47.7 per cent position in Chinese online automotive business Autohome for $2.1bn.

Analysts have also speculated about a possible special dividend for shareholders or M&A activity.

Until now the telco had kept its plans to itself, but broad talk of a “balanced approach” has been replaced by confirmation it would return a chunk of the Autohome proceeds to shareholders.

“Given our recent announcement of the sale of Autohome shares, we believed it was important to provide the market with further information about how we intend to use those funds,” Telstra chief executive Andrew Penn said.

“While specific details of the nature of the capital management program are yet to be confirmed, creating this type of shareholder value is in accordance with our capital management framework.

“Importantly, we also maintain sufficient capacity to invest in our growth plans for the future.”

The capital management program will be in addition to the ordinary dividend, with news of the plan coming on the heels of a report from credit rating agency Moody’s suggesting a return of the Autohome bonanza to investors would be “credit neutral”.

“Moody’s base-case assumption is that a large portion of the proceeds will be returned to shareholders through share buybacks, as Telstra did when it returned $1bn to investors during fiscal 2015 after its sales of CSL New World Mobile and Sensis for a total of $2.4bn,” Moody’s Investors Service vice president Ian Chitterer said.

“If Telstra were to return to shareholders the full sale proceeds from the Autohome transaction, it would be credit neutral because it would be excess cash distributed to shareholders and the amount of lost EBITDA would be insignificant.”

Standard & Poor’s echoed similar sentiments after the Telstra release, with no risk seen to the telco’s credit rating.

At 2.15pm (AEST), Telstra stock had risen 2.1 per cent to $5.47, against a benchmark fall of 0.39 per cent.