Creating value for shareholders

We aim to increase shareholder returns through regular dividends and one-off returns. In 2009 we established a target to grow total dividends per share by at least 7% per annum until the financial year ending 31 March 2013, and consistent with this, total dividends per share increased by 7.1% in 2011 to 8.90 pence per share. In addition, we have committed £6.8 billion to buying back our shares, of which £2.6 billion has been returned to date.

Apply rigorous capital discipline to investment decisions

Discipline of regular business reviews

We are focused on enhancing returns to our shareholders and are therefore careful how we invest shareholders’ money. We regularly review the cash needs of each of our businesses across the globe, taking into account their performance and competitive position.

How we invest your money
Organic investment

We make capital investments, such as for new equipment or spectrum, in our existing businesses to improve their performance and drive organic growth.

Returns to shareholders

We thoroughly review the best ways to provide returns to our shareholders. We have a target of increasing total dividends per share by at least 7% a year until the financial year ending 31 March 2013. When we have surplus funds we consider additional returns to shareholders through special dividends or share buyback programmes.

Selective acquisitions

When managing capital we also consider whether to strengthen the Group by acquiring other companies to increase our operations in a particular market. All potential acquisitions are judged on strict financial and commercial criteria, especially whether they would provide meaningful scale in a particular segment, the cost of the acquisition and the ability to enhance the Group’s free cash flow. For example, in March 2011 we announced our intention to acquire BelCompany BV, the Netherlands’ largest independent telecom retailer, which will expand our Dutch stores from 86 to 296.

Investment principles

All of our investments, whether in existing businesses or acquisitions, are subject to rigorous commercial analysis and demanding hurdle rates (the minimum rate of return on an investment) to ensure they enhance shareholder returns. We remain committed to our target credit rating of low single A for long-term debt as this provides us with a low cost of debt and good access to liquidity from financial institutions.

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