“Rostelecom” decided to send on dividends of 75% of cash flow

Moscow. November 18. The project of the new dividend policy of Rostelecom envisages paying shareholders in 2016-2018 at least 75% of free cash flow, reported the newspaper “Kommersant” with reference to sources familiar with the proposal.

According to calculations of JSC “Rostelecom”, by the end of 2015 it may send a dividend of 12.9 billion rubles, or 4.6 rubles per ordinary share. Payments for 2016 may be 19,6 billion roubles (7 roubles), 2017 – 19,7 billion rubles (7.1 rubles).

The strategy Committee under the Board of Directors of “Rostelecom” will discuss the draft of the new dividend policy on Wednesday. The Committee will meet with Deputy Prime Minister Arkady Dvorkovich, who oversees the communications industry and work the largest state-owned Telecom operator, reported earlier, President of “Rostelecom” Sergey Kalugin. Formally, the strategy Committee Dvorkovich is not included.

The end of the year dividend policy will be reviewed by the Board of Directors, promised Kalugin. The Board of Directors of “Rostelecom” heads of other major government official – the head of the presidential administration Sergei Ivanov.

“We do offer a competitive dividend policy compared with the policies of the “big three”. On the basis of cash flow that we can see today, if the shareholders decide to increase dividends, we believe that it will be possible to perform”, – said Kalugin. He reported that “Rostelecom” expects to direct on payment of dividends the main part of the cash flow.

“We expect next year a much smaller CAPEX, we basically need less money, so it may change the proportion between what a company does, and that I can take the shareholders”, – said Kalugin. He noted that in 2015 “Rostelecom” completes large-scale construction project “last mile” broadband access. Investment in the elimination of the digital divide in sparsely populated territories Rostelecom at the expense of public funds. By the end of 2015 “Rostelecom” expects capital expenditures (excluding project on “digital inequality”) level 19-19,5% of revenue. The latter is projected at the level of the previous year (299 billion), or within a decline of 1 percentage point. Forecasts for the next year, the company has not yet been granted.

In the first 9 months of 2015 free cash flow of Rostelecom declined to 12.9 billion from 16.2 billion rubles. In the third quarter it rose 72%, to 6.4 billion rubles.

The current dividend policy of Rostelecom, which was approved in late 2011, involves the payments on the ordinary shares not less than 20% of net profit under IFRS, “prefs” – 10% of the net profit according to RAS, divided by the number of shares corresponding to 25% of the share capital (the real number of “prefs” in the Charter capital of Rostelecom was 8.3%). Thus “Rostelecom” as a state company, should direct on dividends not less than 25% of net profit under RAS.

Dividends Rostelecom ordinary shares unattractive for investors, as well as provide the yield is twice lower than that of the securities of MTS and “Megaphone”, noted analysts. Competitors are state-owned companies calculate dividends on the basis of net profit, subject to a one-time “paper” factors, while net cash flow.