TELSTRA chief executive David Thodey has described the company's $11 billion national broadband network windfall as a "dividend opportunity" as its board prepares one of its biggest capital management initiatives since listing.
In an interview with The Australian Financial Review, Mr Thodey stressed that no final decision on capital management could be made by the board until Telstra's deal with the NBN, resoundingly endorsed by shareholders last year, was approved by regulators.
"Subject to [the ACCC] finalising our structural separation undertaking, we will come out with our capital management strategy and we'll address the dividend issue then. Or the dividend opportunity, I should say," he said.
Telstra has committed to paying a 28¢ dividend for the next two fiscal years, but asked about its policy beyond that Mr Thodey said: "We are very conscious, for a company like Telstra with such a large retail shareholder base and also big institutions, that the dividend policy is very important to them in terms of a way of giving returns back to our shareholders."
"The board's very conscious of that so it will be factored into our capital management strategy."
Telstra will receive payments over the next decade worth an estimated $11 billion as part of a deal to transfer customers and lease infrastructure to the NBN.
To secure the deal, Telstra agreed to structurally separate, so its competitors are not disadvantaged during the decade-long rollout of the network.
The Australian Competition and Consumer Commission has indicated it is likely to approve the separation of Telstra's wholesale and retail divisions in February.
Telstra chairman Catherine Livingstone last year said the board will consider "further capital management" once the NBN deal was finalised, specifically mentioning a share buyback.
Analysts believe a share buyback is the most effective way for Telstra to return additional capital to investors. About 30 per cent of its shareholders are based offshore, and it has exhausted its franking credits under previous management, after gearing up to pay dividends. Reducing the share count would also lower the cost of paying dividends in the future.
CLSA analyst Digby Gilmour last week reaffirmed his belief that the company will conduct a $1 billion share buyback over the next two years, notwithstanding the potential for increased capital expenses relating to the renewal of spectrum licences.
Mr Thodey said he was eager to move beyond the negotiating phase with NBN Co and begin life under the new wholesale monopoly, which will see Telstra transform from a network operator into a sales and marketing focused company.
"Look, I think that we are all very keen to get this thing done and move on," he said.
"We've got to respect the ACCC in terms of going through the process but from the government and NBN Co, the industry and ourselves, we all want to get this done and . . . move on to the NBN era.
"The question now for us . . . is with the NBN transaction, how we can continue to create value from those funds as well as giving good returns to shareholders? That's the big decision for the next couple of years."
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