UPDATE 3-Telenor to hike dividend payouts
(Adds CEO quotes, detail, background)
* Dividend aim of 50-80 pct of annual net income vs pvs 40-60 pct
* Says aiming for growth in annual dividend payout
* Maintains financial targets in India
* Shares fall 2.7 pct, outperforming falling Oslo bourse
By Victoria Klesty and Joachim Dagenborg
OSLO, Sept 22 (Reuters) - Norwegian telecoms company Telenor set out a more generous dividend policy on Thursday, offering to share of the spoils of emerging market growth having been criticised of hostility to its own shareholders' interests.
The company, one of the world's biggest mobile operators by subscriptions, said the dividend would be about 50 to 80 percent of normalised annual net income, against a previous target of 40 to 60 percent. It would also aim for growth in the annual payout.
Telenor also said it would increase its net debt to core earnings ratio to 2.0 from 1.6, during a capital markets day, adding that it would maintain it targets for India where it is hoping to offset declining margins at home.
"The business in Asia is still growing... and with the operations in Asia becoming more mature, we will see a significant rise in operating cashflow from these operations," Telenor Chief Executive Jon Fredrik Baksaas told Reuters.
He added that an improved balance sheet since the 2008 economic crisis had also helped.
"These elements combined allow us to rephrase the dividend policy," said Baksaas.
Analysts broadly welcomed the announcement, with one arguing that the company's dividend policy had previously been "outright hostile" to shareholders.
"This is a step in the right direction. I look very favourably on it," said Thomas Nielsen at Pareto Securities. "Telenor's problem hasn't been a lack of earnings, but the fact that they haven't paid it back (to the owners)."
He added that there was no reason to change the earnings estimates for Telenor as it kept to its financial targets.
Shares in Telenor were down 2.69 percent at 1007 GMT, outperforming an Oslo benchmark index down 3.6 percent.
"Based on what they have released, it looks good and in line with expectations," said Espen Torgersen, an analyst at Carnegie. "They are increasing dividend payouts and keeping the targets for India unchanged."
In terms of mergers and acquisitions, Telenor said it would have a "disciplined and selective approach" in the future.
The Norwegian firm has sustained several corporate battles with foreign partners, not least with Russia's Altimo over the control of joint venture Vimpelcom .
The firm said it may also consider selling assets that are not core to the business. Baksaas declined to comment on which of Telenor's assets could be up for the chop.
FOCUS ON INDIA
Torgersen at Carnegie said the key point to follow during the capital market days would be the outlook for India provided by Telenor's head of operations there.
Telenor has been banking on fast-growing emerging countries to offset declining margins on its crowded home region markets.
"Today the most interesting thing will be to hear what Sigve Brekke is saying about the situation in India," said the analyst.
Telenor has been struggling to establish itself as one of the top players on the crowded Indian market, where the company's costs so far outstrip income.
It has more than 20 million subscribers but made a loss of almost 1 billion crowns in the second quarter.
Telenor repeated that it expected earnings before interest, taxes, depreciation and amortisation (EBITDA) to break even in three years from launch, while its operating cash flow would break even in five years from launch. Telenor launched services in India in December 2009.
It also maintained peak funding would be within 155 billion Indian rupees ($3.2 billion).
Telenor's majority-owned Indian subsidiary, Uninor, has been embroiled in a corruption scandal over the award of 2G licences, a scandal that has rocked the government of Prime Minister Manmohan Singh.
Telenor has long said that if corruption had occurred, it was before 2008, when it bought its Indian mobile licence from partner Unitech , which holds 32.5 percent of Uninor.
Telenor has also said it had found no irregularities in the way the licenses were awarded. ($1=48.330 Indian Rupees) (Additional reporting by Camilla Knudsen, Writing by Gwladys Fouche; Editing by David Holmes and Mike Nesbit)
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