Vodacom, SA's largest cellular operator, has paid out almost all of its free operating cash flow in the form of dividends.
The company yesterday released its results for the six months to September and said it increased its shareholder payout by 44.4%, to 260c.
Vodacom reported R27.8 billion in service revenue, a 6% gain; R10.5 billion in earnings before interest, tax, depreciation and amortisation (Ebitda); while net profit was 2.8% higher at R4.39 billion. The company generated free cash flow of R3.9 billion.
Vodacom's dividend policy is to pay out at least 70% of headline earnings. In the first half of the year, it reported headline earnings of R4.7 billion.
In the first half of last year, it paid out 180c, and 280c at year-end.
CEO Pieter Uys explains that the company does not have much gearing and Vodacom does not currently have anything in which to invest. He says paying out a higher dividend is the most efficient use of the cash.
Under-geared
Uys explains increasing the debt to equity ratio will allow the operator to do several smaller deals, or take it “a long way” towards a large transaction.
Vodacom is on the lookout for opportunities in Africa that would allow it to be one of the top three players, and would be adjacent to current operations, says outgoing CFO Rob Shuter.
The cellular company has operations in Tanzania, the Democratic Republic of Congo, Lesotho and Mozambique.
Uys adds, however, that the company will not overpay. After Bharti bought out Zain, operators have set the asking price too high, he explains. “I'm still optimistic that there are opportunities; it's definitely part of our strategy.”
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