Numericable-SFR on Wednesday announced it will pay a one-off dividend totalling €2.5 billion, a strategy that left some analysts scratching their heads.
The French cable and mobile operator said it is able to make the €5.7-per-share payment thanks to the synergies generated by the acquisition of SFR by Numericable’s parent Altice. Those synergies are ahead of the company’s guidance and should continue in the coming year, the firm said.
"The strategy allowed Numericable-SFR to reposition, recover and generate profits ahead of expectations," it added.
The dividend will be financed via a loan of at least €1.6 billion, in addition to available cash, Numericable-SFR said. It confirmed that its net debt:EBITDA ratio will remain at well below four times, at a similar level to November 2014 when the merger deal got the go-ahead.
The operator also insisted that its network investments in 4G and fibre will not be affected.
Nonetheless, analysts were more than a little perplexed by the payout.
"This announcement comes as a surprise, not only in terms of timing but also in terms of size of the dividend," said analysts from Haitong Research, in a statement.
"While it signals a great deal of confidence in the synergies delivery from the SFR integration and in that sense a positive indication, making use of debt to pay dividends in a structure that we already see as highly geared does not make much sense in our view," they said.
Numericable-SFR’s board will meet on 15 December to approve the dividend payment. The distribution will then take place within 30 days.
