MTelekom proposes flat dividend, share buybacks

BUDAPEST, HUNGARY: Magyar Telekom said on Friday it would maintain its 2009 dividend at 74 forints ($0.375) per share and proposed buying back up to 10 percent of its own stock, sending its share price sharply higher.

The company said the share buyback proposal was designed to update its remuneration policy but added its board believed dividend payment should remain the main tool of shareholder remuneration.

At 1257 GMT, Magyar Telekom stock traded 4.84 percent higher at 715 forints on the Budapest Stock Exchange, extending gains of about 2 percent prior to the announcement and outperforming a 1.11 percent increase in the benchmark.

Magyar Telekom said the dividend "reflects the group's solid financial position and cash flow generation in 2009, despite the unfavourable operating environment".

The company could buy back up to 104.3 million, or 10 percent, of its own shares on the market in an 18-month period under the proposal, which is subject to shareholder approval at its annual general meeting on April 7.

"We take this to mean that the company is likely to look to buy back shares during potential times of share price weakness in the future which we believe is likely to help put a floor under the share price," said analyst Anna Bossong at HypoVereinsbank.

On Thursday the company, a unit of Deutsche Telekom, reported fourth quarter results that missed market expectations and forecast a further decline in profits for 2010 due to a steep economic downturn in its domestic market.

Against that backdrop, analysts said the company proposing an unchanged dividend over the previous year was a positive and the stock looked attractive at current prices.

"Investors should also be relieved that the dividend wasn't cut after yesterday's announcement of a dividend cut at Telefonica O2 Czech Republic," Bossong said.