TPG Telecom Limited (ASX: TPM) – The needle on TPM’s special dividend


Amid ongoing talks on possible merger of two Telecom giants TPG Telecom and Vodafone Hutchison Australia (VHA), market is speculating on how big TPG’s special dividend would be like.

At the end of the previous month, TPG Telecom Limited announced the proposed merger of equals between TPG’s small cell network and VHA’s mobile network. The company said that it may declare a cash special dividend, fully franked, prior to the implementation of merger but how much, they didn’t tell. TPG’s small mention of special dividend leaves its investors in the iota of doubt as to what will be the actual size of the special yield which made analysts to place bet on it.

TPG has net debt of $1.3 billion at July 30, 2018 plus funding commitments including spectrum payment of $597.3 million, while TPG wants to go forward into the merger with net debt of $2.024 billion which includes $80 million spectrum payment.

After taking into account all these factors along with the receipt of regulatory approvals to the merger transaction and the impact of operating cashflows in the meantime, the many experts forecasted that TPG would have $418 million left over come merger date which would allow it to pay a 45 cents special dividend per share. Whereas some said that the payment of special dividend may hand around the range of 29 cents to 38 cents per share.

The analysis is said to be based on the results announcement made by the company yesterday. For one year period to 30 June 2018, the group’s EBITDA slipped by 5.6% to $841.1 million in view of gross margin decline, with customers’ migrating to National Broadcast Network along with impact noted from higher electricity prices.

FY19 is still believed to be a year of EBITDA growth at the back of ‘business as usual’ (BAU) operations. The group has given a guidance of $800 to $820 million.

Post FY18 result announcement, TPM’s share price nosedived 5.39% to $8.250 on 19 September 2018. The stock has seen a performance change of +67.05% over the past one year while it has gone up by 4.18% in the last 5 days. TPM is currently trading at PE of 20.370 x with the market capitalization of $8.09 billion.

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