Belgacom SA (BELG), the largest phone company in Belgium, rose the most in Brussels since going public in 2004 after raising its forecasts and shareholders got an extra payout amid a wave of dividend cuts in the industry.
Belgacom rallied 7.8 percent to 23.14 euros at the 5:35 p.m. close of trading in Brussels, the biggest gain since it first sold shares at 24.50 euros in March 2004. The shares returned 2.7 percent including reinvested dividends so far this year, compared with a negative return of 1.4 percent for the Stoxx 600 Telecommunications Index in the period.
The state-controlled company said today investors will receive a special dividend of 31 cents a share on top of the regular payout this year. Belgacom also raised its 2012 forecasts, saying revenue will increase slightly rather than decline and projecting a smaller decrease in earnings before interest, tax, depreciation and amortization, or Ebitda.
“Belgacom’s dividend is much more committed, as the Belgian government needs the dividend for the budget, compared to peers,” Emmanuel Carlier, an analyst at ING Groep NV in Brussels, wrote in a note to investors. “In terms of subscriber numbers, Belgacom did well on the fixed side, but lost momentum on the mobile front.”
Phone companies from France Telecom SA to Royal KPN NV, struggling to contain debt and facing declining sales and margins amid tougher regulation and intensified competition, have cut their projected dividends this year. Belgacom, whose net debt of 1.47 billion euros ($1.9 billion) equals about 0.8 times Ebitda, said its Internet Everywhere offer boosted broadband and TV revenue in the quarter as the acquisition of Phone House stores and a shift toward internet sales helped to soften the impact from a loss of mobile clients and price caps on data roaming.
Belgacom began offering free access to its mobile network for clients on broadband Internet subscriptions in April. That change also allowed Belgacom to increase prices for its bundled offerings of telephony, broadband Internet and digital television.
“We remain cautious as trends could deteriorate,” said Javier Borrachero, an analyst at Kepler Capital Markets in Madrid. “Belgacom has started to show an acceleration in total customer loss. The solid track record in TV is now more threatened.”
The phone company unexpectedly lost 39,000 mobile customers in the quarter, while the loss of 30,000 fixed-phone lines was smaller than analyst projections. It added 32,000 TV subscribers and 12,000 broadband lines.
Third-quarter net income fell 5.6 percent to 184 million euros, Belgacom said in the statement. That beat analyst projections of 166.7 million euros, according to the average of seven estimates compiled by Bloomberg. Revenue rose 1.5 percent to 1.62 billion euros.
The extra dividend will “exceptionally” increase the full-year distribution to 2.49 euros a share from a projected 2.18 euros, Belgacom said. The phone company is distributing a remaining 100 million euros from a 200 million-euro share- buyback program that was announced in February 2011.
The Belgian incumbent may not be able to repeat that payout as free cash flow declined 29 percent to 537 million euros in the nine months through September and Belgacom’s dividend policy calls for a full distribution of the cash generation that’s not required for reinvestment.
Belgacom’s third-quarter free-cash-flow generation dropped 34 percent to 248 million euros. That surpassed analyst projections of 212.2 million euros, the average of five estimates compiled by Bloomberg.
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