TPG Telecom (ASX: TPM) has reported a record financial year, but will hold back some dividends from shareholders to fund its new mobile network which is expected to cost around $1.9 billion.
The company reported a net profit after tax of $413.8 million for FY17 to July 31, an increase of 9 per cent over FY16.
However, the company will retain the profits in order to reinvest the money into the group's recently acquired mobile network.
TPG has slashed its final dividend from 7.5 cents to a fully franked 2 cents per share fully franked, payable on 21 November.
Executive chairman David Teoh says shareholders will benefit in the long term from what he called a "fiscally prudent" decision.
"The board is very conscious of shareholder interest in securing returns by way of dividends and is favourably disposed to increasing dividends over time," says Teoh.
"The board has concluded that it is in the best interests of shareholders that a greater proportion of profits be retained in the company to be deployed in the mobile rollouts.
"The board believes this to be a fiscally prudent approach."
The company delivered a revenue lift of 4.3 per cent to $2.5 billion in FY17.
Australia's fourth-ranked internet player has forecast it will face pressure on earnings next year due to increased costs from migrating customers onto the national broadband network. The company expects its DSL subscribers to decline by between 400,000 to 500,000 during the 2018 full-year as they shift to the NBN.
The group's capital expenditure of $576.3 million included $207.5 million of mobile spectrum purchases, including the $73.1 million Australian 1800MHz spectrum and $10 million prepayment in relation to a 700MHz Australian spectrum.
In terms of the group's rollout of its mobile networks in Singapore and Australia, TPG says it is making good progress.
The Singapore network is on track to achieve the first milestone of nationwide outdoor service coverage before the end of 2018.
In Australia, where the initial implementation of the mobile network is concentrated on the cities, implementation in Sydney, Melbourne, and Canberra is expected to be complete by mid-2018.
At around 11.30am (AEST), shares in TPG were more than 7 per cent higher at $5.62 per share.
Business News Australia
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