Telecom to review capital structure
Forsyth Barr analyst says if companies signal capital management, they are usually thinking about share buybacks, special dividends or share cancellations.
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Telecom will begin a review of its capital structure following the Chorus demerger.
The new Telecom board had endorsed management’s start of a review to make sure the company’s capital structure was “appropriate” as it operated post-demerger, Telecom chief executive Paul Reynolds said. Telecom would focus on its core business of delivering service to New Zealand customers, he said.
The company said as noted in its scheme booklet, that it intended to adopt a capital structure consistent with an “A band” credit rating.
The review was not expected to result in any great changes, corporate communications manager Ian Bonnar said, as any changes to the structure would still fit within the “A band” rating.
Mr Reynolds said post demerger, scope existed for some form of capital management while still maintaining an “A band” rating.
Mr Bonnar said Telecom would look at what these forms of capital management could be in the next few months.
The company expected to provide more information relating to its capital structure at its half year results in February, it said.
Forsyth Barr senior analyst Guy Hallwright said it was probably true that most analysts' models had debt reducing in Telecom over the next few years.
"It will have capital expenditure well below depreciation so very strong cash flows and debt coming down even though they've got a 90% dividend pay out ratio so there will be potential for them to do something in the way of returning capital to shareholders to prevent their debt levels from going down to, ultimately, disappearing completely."
He said if companies signalled capital management, they were usually thinking about things like share buybacks, special dividends or share cancellations.
Telecom shares [NZX: TEL] were relatively flat today opening at $1.99 with a high of $2.02 and a low of $2.00
Alex Walls
Wed, 07 Dec 2011
Wed, 07 Dec 2011
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Telecom to review capital structure
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