Dividend bonanza as mobile groups pay out billions

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The Independent Online

Vodafone and mmO 2 will this week outline plans to return billions of pounds to shareholders through new dividends and share buyback programmes.

Vodafone and mmO 2 will this week outline plans to return billions of pounds to shareholders through new dividends and share buyback programmes.

Vodafone will kick off on Wednesday by announcing an increase in its interim dividend by around 75 per cent. This will see the mobile phone giant returning over £1bn to shareholders.

The company will also ramp up its share buyback programme, which is designed to enhance the value of its investors' equity. In May, Vodafone promised to buy £3bn of its shares by the end of the year and the company is now just over halfway to its target. But City sources expect Vodafone to add up to £1bn to that figure, although the target will be rolled into next year.

On Thursday mmO 2 will unveil plans for its first-ever dividend. The company will apply to the courts to create so-called distributable reserves, allowing it to start the payments with its preliminary results next year. MmO 2's dividend is expected to be around 2p per share, costing the company £173m.

The cash is coming early for shareholders. When mmO 2 demerged from BT in 2001, analysts estimated that dividends would arrive in 2006.

Both companies will be quizzed this week on their strategy for 3G, which offers high-speed mobile internet access. MmO 2 is planning to sell the phones in the new year. Vodafone launched last week.

Arun Sarin, chief executive of Vodafone, told The Independent on Sunday: "3G offers us the chance to freshen up our services. It is very important to the business as it will help revenue growth in the mid-term and profits in the mid to long term."

He denied that high handset subsidies would eat into Vodafone's margins, claiming that cost-cutting plans would offset the new 3G expenses.

And he predicted that Vodafone would recoup the £5.9bn cost of buying its UK 3G licence over 20 years.

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