Kabel Deutschland intends to hike its dividend by 67% and increase investment as funds became available after plans to buy peer Tele Columbus fell through.
Shares in Germany's biggest cable operator rose 2.5% in early trade on Wednesday amid speculation the move could be part of its strategy to deal with a potential bid from UK based mobile company Vodafone.
Kabel Deutschland said it would raise its dividend to 2.50 euros ($3.34) per share for the fiscal year ending in March, up from 1.50 euros in the previous year.
It said its failed attempt to buy peer Tele Columbus for 618 mln euros would free up money for the higher dividend as well as for extra investments.
Kabel Deutschland said on Tuesday its agreement to buy the fellow cable operator was at risk due to German antitrust concerns.
Kabel Deutschland shares were up 2.24% higher at 68.88 at 0842 GMT, at the top of a 0.23% stronger sector index.
A Frankfurt-based trader said the dividend and investment hike should be seen in the light of Vodafone's potential interest.
"This seems the first poison pill to avert a Vodafone takeover," he said. "The takeover battle has started."
Kabel Deutschland on Wednesday also posted earnings before interest, taxes, depreciation and amortization (EBITDA) excluding special items for the three months ending December 31, up 10% from the same period a year earlier to 220 mln euros.
Growth was fuelled by its internet broadband as well as its television operations, Kabel Deutschland said in a statement.
Kabel Deutschland's success in the broadband market has caught the attention of Vodafone, the biggest mobile operator in Germany, and the UK-based company is considering a bid for the German company.
Vodafone is mulling an offer as it is facing a squeeze between low-cost mobile challengers and telecom and cable rivals increasingly pushing discounted, all-included mobile and fixed bundles, the person said.
"The figures are solid but unspectacular in our view. The dividend increase is a positive surprise," said DZ Bank analyst Karsten Oblinger in a first reaction.
"The big question regarding the share price remains if Vodafone will come up with a bid. Here we have no additional clue so far."
Kabel Deutschland said it still aims to increase sales in the current fiscal year by between 7.5% and 8.5% and expects an adjusted EBITDA of 855-870 mln euros for the period.
It also said it would invest an extra 300 mln euros in the coming two years in its network.
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