Telkom suspends dividend policy for three years over spectrum auction

Telkom has suspended its dividend policy for the next three years as it considers capital expenditure needs in light of the imminent auction of spectrum.

The group’s current policy is to pay an annual dividend of 60% of headline earnings with an interim dividend of 40% of interim headline earnings.

The group has suspended its dividend policy from its 2021 financial year, saying on Monday: “The imminent spectrum auction will require a substantial amount of capital and it is of strategic importance for Telkom to participate to ensure the sustainability of the mobile business.”

The auction of high-demand spectrum was expected to take place before the end of 2020.

Spectrum refers to radio signals set aside to carry data, including for smartphones, TV and GPS systems. The licensing is expected to ease network congestion and reduce data costs.

In line with its current payout policy, the group has paid a final dividend of about 50c per share for its year to end-March, bringing its total dividend to 121.61c per share, about a third of the prior comparative period.

Headline earnings per share fell 66.4% to 208.1c, with the group facing one-off costs related to cutting staff, as well as costs related to Covid-19, which is weighing on the outlook for South Africa’s economy.

The group has set aside R1.14bn to cover potential losses from customers who may be unable to pay their bills as they battle job losses and deep pay cuts. 

Group revenue rose 3% to R43bn, with mobile service revenue surging 54.4% to R12.6bn, while fixed-line revenue fell 22.2% to R8.7bn.

In morning trade Telkom’s share price was down 4.4% to R26.29, bringing its year-to-date loss to about 46%.