Telstra shares were pushed higher in yesterday’s weaker market after it did what many shareholders wanted it to do and revealed plans to return around $1.5 billion of the $2.1 billion return from the sale of the majority of its stake in Chinese online car retailer Autohome.
But investors will have three months until the full-year results to find out how that promise from Telstra will be structured. The shares rose 2.8% to $5.51.
Telstra revealed the sale of 47.7% of Autohome last month. The deal was done, at $US29.55 per share, totalling $US1.6 billion ($A2.1 billion) – leaving the telco with a 6.5% stake.
Telstra said it expected to book an accounting gain of $1.8 billion from the deal.
Telstra did not confirm whether the capital management initiative would take the form of a share buyback or special dividend, but it will be in addition to the ordinary final dividend.
Details will be announced when the company announces its 2015-16 results on August 11.
Telstra said yesterday it is currently examining various ways to return capital to shareholders with the exact nature, amount and timing dependent upon market conditions and all necessary regulatory approvals.
"It is intended that the proceeds from the recently announced sale of Autohome shares will be used to fund the capital management program,” the company said yesterday.
Chief executive Andy Penn said in a statement the company “believed it was important to provide the market with further information about how it intended to use the proceeds of the Autohome share sale.
"While specific details of the nature of the capital management program are yet to be confirmed, creating this type of shareholder value is in accordance with our capital management framework.
"Importantly, we also maintain sufficient capacity to invest in our growth plans for the future."
Since the sale, the market has been expecting some sort of capital management move, and given Telstra’s low level of retained franking credits, a special dividend seems unlikely. So a buyback looks the go.
Telstra made the announcement ahead of an investor day in Melbourne yesterday.
