Taiwan Cellular increases its cash dividends by 20%

Taiwan Cellular Corp (台灣大), the nation's No. 2 mobile operator by number of subscribers, said yesterday its board has decided to increase its cash dividend by 20 percent to NT$2.4 per share, a better return than the average interest rates on fixed deposits.

The dividend payout will represent an 83 percent payout ratio, up from about 71 percent last year, said chief financial officer Cheng Hui-ming (鄭慧明).

"Taiwan Cellular will stick to the current high-cash dividend policy in the future," Cheng said.

The mobile carrier paid a NT$2 cash dividend last year.

The NT$2.4 cash dividend represents around a 7.5-percent return for investors based on the company's closing price of NT$31.7 on the TAIEX yesterday, much higher than the less than 2 percent average interest rate local banks pay for one-year fixed-term deposits.

"The cash dividends are quite attractive for big institutional investors -- such as insurers -- seeking stable returns," said Gary Lai (賴晴風), an analyst at Insight Pacific Investment Res-earch (月涵投顧).

Dividend payouts are important in attracting investors' interest, especially for local telecommunications operators, which face difficulties in pushing up their earnings in a nearly saturated market such as Taiwan's, Lai explained.

STABLE INDUSTRY

During a conference call with foreign investors, Cheng said Taiwan's telecom industry is likely to increase 2 percent to 5 percent this year, although he did not give specifics for Taiwan Cellular.

Despite the respectable returns, Wu Pei-wei (吳佩偉), a portfolio manager who helps oversee a NT$600-million fund for ABN-AMRO Asset Management Taiwan Ltd, said he is not interested in buying telecom shares at the moment.

"The telecom industry is simply too stable to expect a high growth. It will only occur after the government allows consumers to switch mobile operators while keeping their original numbers," he said.

Chunghwa Telecom Co (中華電信), Taiwan Cellular's bigger rival, paid a NT$4 cash dividend last year.

The state-run company said it will stick to its high-cash dividend policy this year, but the specific number will not be released until its board meets in April.

Taiwan Cellular said its net income slid by about 11 percent to NT$13.34 billion last year on lower revenue of NT$45 billion because of accounting changes for the full year. Earnings per share fell to NT$2.91.

The company plans to increase its capital expenditures slightly from 11 percent of its revenue last year, but the payouts will remain at low double-digits, with half of the amount going to third-generation (3G) networking.

It spent NT$1.5 billion on such expenditures last year.

To improve the operation efficiency of its affiliates, Taiwan Cellular told foreign investors it plans to take up to a 60-percent reduction in its paid-in capital by the third quarter of this year, Cheng said.