China's three major telecom operators have announced that they will pay significantly higher interim dividends for the first half of 2024 than the same period last year, while reducing capital investment.
This is a result of the Chinese government 's direction towards state-owned enterprises, requiring them to shift their focus to stock market performance and shareholder returns.
On August 20, China Telecom - one of the three largest telecommunications companies in China - announced an increase in its interim dividend by 16.7% year-on-year, reaching 0.1671 yuan/share.
China Telecom paid out a total of 15.29 billion yuan ($2.14 billion) to shareholders. Notably, the increase in dividends exceeded the company's net profit, which rose 8.2 percent in the first six months of the year to 21.46 billion yuan.
Committing to “sharing the results of development” with shareholders, China Telecom Chairman and CEO Ke Ruiwen affirmed that the dividend payout ratio will be further increased to more than 75% in the next three years, starting from 2024. The ratio was 40% in 2020 and has been gradually raised, reaching about 70% in the first half of this year.
Along with the dividend increase, China Telecom said it would cut capital spending. In the first half of this year, its capital spending reached 47.2 billion yuan, up 13.5 percent from the same period last year. Its full-year plan calls for a 2.9 percent cut to 96 billion yuan.
The pattern of higher dividend payments and lower capital expenditures is also common among its telecom peers, with China Mobile leading the way in dividend payments. China’s largest mobile carrier, and the world’s largest, announced it had surpassed 1 billion subscribers for the first time in June 2024.
China Mobile Chairman Yang Jie said the company has distributed a total of more than 1.3 trillion yuan to shareholders since its listing in 1997.
In the latest reporting period, the company’s board pledged to increase its interim dividend by 7% to HK$2.60 per share, totaling HK$55.56 billion ($7.12 billion). Dividend growth is expected to outpace interim net profit growth, which is expected to rise 5.3% to HK$80.2 billion from January to June 2024.
Earlier this year, China Mobile pledged to increase its dividend payout ratio to more than 75% over a three-year period starting in 2024. Chairman Yang said the company's annual capital expenditure target remains unchanged at 173 billion yuan, or down 4% from last year.
China Unicom, the smallest of China’s three telecom giants, said it would raise its interim dividend by 22.2% to 0.2481 yuan per share and cut capital expenditure by 13.4% to 23.9 billion yuan during the period. Its full-year investment is expected to be cut by 12% to 65 billion yuan. The company’s dividend payout ratio is 55%.
High dividends at low cost of capital is the current market trend in China, where high-yielding stocks are well received by investors amid a gloomy overall economic outlook.
Explaining the reason for the cut in investment by Chinese telecom carriers, experts say that spending on 5G infrastructure has peaked. Regarding the latest 5G-Advanced (5G-A) technology, considered a precursor to the next generation of 6G, China Telecom Chairman Ke confirmed that: "It will not require significant investment."
China Mobile's Yang said commercial use of 6G won't happen until 2028 at the earliest. This leaves plenty of room for telecom operators to increase spending on other purposes.
Since a document issued by the State-owned Assets Supervision and Administration Commission of China in May 2022 requiring major state-owned enterprises to improve the quality of their listed subsidiaries, pressure has been mounting on companies to step up efforts at "market value management."
The document states that companies need to promote improved corporate governance, raise disclosure standards, conduct share buybacks and increase cash dividends.
Xie Xiaobing, head of the commission's property rights administration, said he has proposed that performance evaluations for SOE executives be linked to market performance. Xie specifically mentioned that companies should pay out more cash dividends, "to better improve shareholder returns."
Source: https://www.vietnamplus.vn/ba-hang-vien-thong-hang-dau-cua-trung-quoc-tang-manh-chi-tra-co-tuc-post971944.vnp
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