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tonyhughes: Why shouldnt a company who is still going to experience good growth, despite a regulatory environment, take the opportunity to reward the patience and commitment of its shareholders, who have watched the share price plummet?
Are you saying they should not be allowed to do that?
No, certainly not if they ARE experiencing good growth. But are Telecom experiencing good growth?
Consider this statement made as part of yesterday's first quarter results announcement:
Chief executive Theresa Gattung said Telecom would not upgrade its full-year net profit forecast of between $820 to $860 million - compared with $820 million the year before
Doesn't sound like "Good Growth" to me. At best it is 4.9% which is only just above the rate of inflation
If Telecom can work out how to grow their business under this new regulatory environment, make the necessary investments to KEEP IT GROWING and after all the bills are paid, and debt is reduced to a sensible level, they still have money in the pot, then by all means pay a dividend out to those poor long-suffering cash hungry shareholders...
But anyone who thinks Telecom has reached that state of Nirvana is living in a fool's paradise.
As part of yesterday's results announcement, it was stated that Telecom Directories would be put up for sale, as Theresa put it on last night's TV news: "For a price North of $1.5 billion".
This is probably a sensible move given that hard-copy directories are rapidly losing their relevance, and the Telecom Yellow Pages web site is not exactly cutting edge any more. In our business, I have taken the decision this year to cancel Yellow Pages advertising (after being in there for over 15 years) because their web site was no longer delivering referrals to our own site anymore, rather they were coming directly through Google. How many people in 2006 would bother to look for a computer company in the hard copy Yellow Pages?
So, I think that Telecom's decision to put their Directories business up for sale is a wise one. Hopefully, someone like Google will be prepared to pay a premium price for it (as they have for just about everything else) and Telecom can refocus away from a non-core business towards what really matters: Maintaining their technological leadership in the NZ Telecommunications industry.
It's all good, you might think...
But NO. What do Telecom's board propose to do with the sale proceeds from Telecom Directories?
Silly me for asking, they have announced plans to pay most of it out as a "Special Dividend" to shareholders of course!
Even though they have $3 BILLION in debt on their balance sheet!!!
I'm sure most of you have heard the common wisdom that paying off your mortgage is the best investment you'll ever make. Once that's paid off, you can sensibly look at other options.
But to sell off part of the family silver (Telecom Directories) which has been built up over decades while Telecom was owned by the taxpayers of NZ, and then squander the proceeds with a Special Dividend to Shareholders, just beggars belief!!!
Clearly it should be used to either pay off debt, or to invest in much-needed infrastructure. Common sense you might say...
[Moderator edit (MF): moved to Telecom]
