(Recasts with dividend policy, adds quotes)
KUALA LUMPUR, Dec 10 (Reuters) - Malaysia’s dominant phone company, Telekom Malaysia Bhd (TLMM.KL), on Monday sweetened its plan to split into two listed companies by announcing a special dividend of 65 Malaysian cents.
The payment will be worth more than the entire year’s anticipated regular payout.
Telekom will split into fixed-line and mobile units early next year to unlock value from its rapidly growing mobile business, which spans operations from southeast Asia to the sub-continent.
The demerger plan, first unveiled in September, was approved by the board on Saturday and should be finalised in the second quarter of 2008, Telekom said in a statement.
Chief Executive Abdul Wahid Omar sought to stoke interest in the fixed-line business on Monday, saying it would pay a generous divided of up to 90 percent of annual after-tax profit or 700 million ringgit ($211 million), whichever was higher.
“The fixed-line unit aspires to be Malaysia’s leading next-generation communications provider...,” he told reporters at a briefing on the details of the demerger plan.
But the market has its doubts, especially as state-controlled Telekom’s fixed-line unit is expected to invest heavily under a government plan to develop a high-speed broadband network.
Abdul Wahid said the fixed-line business would invest annually about 1.25 billion ringgit ($376 million) over four years to help build the national broadband network.
Ratings agency Moody’s highlighted the market’s doubts on Monday, signalling a possible downgrade for the fixed-line unit.
Moody’s said it would study the final terms of the broadband project in reviewing Telekom’s A2 senior unsecured rating.
It noted that most of the group’s debt would be shifted to the mobile unit after the demerger, but said the remaining fixed-line Telekom business would still have drawbacks.
“Strengths are partially offset by the less geographically diverse and monocular business profile,” says Laura Acres, a Moody’s vice-president, said in a statement.
Telekom is forecast to pay a full-year dividend of about 49 sen per share for 2007, according to Reuters Estimates.
Telekom owns the country’s second-largest mobile operator, Celcom, and also has mobile businesses in Indonesia, Bangladesh, Sri Lanka, India, Singapore and Cambodia.
Together, these mobile businesses deliver most of its growth, but the group’s share price has been constrained by its large and dwindling domestic fixed-line business. (Reporting by Clarence Fernandez, editing by Mark Bendeich and David Cowell)