T

he dividend payout ratios of Telekomunikasi Indonesia (Telkom) and gas distribution firm Perusahaan Gas Negara (PGN) are expected to remain the largest among state-owned enterprises despite the government'€™s plan to reduce dividend payments this year, a minister has said.

'€œTelkom'€™s dividend payout ratio will probably be around 40 percent and PGN'€™s will be between 40 and 50 percent, the largest'€, State-Owned Enterprises (SOEs) Minister Rini M. Soemarno said last week.

The ratios are lower than the dividend payout ratios of previous years. In 2014, the dividend payout ratios of Telkom and PGN were 6.5 percent and 46.4 percent of their net profits, respectively.

The government has set a target of Rp 34.9 trillion (US$2.7 billion) in dividend payments this year, much lower than the Rp 44 trillion set in its initial state budget plan. With lower dividend payments, SOEs will have additional funds with which to conduct their businesses.

Of the Rp 34.9 trillion, Rp 17.6 trillion will come from 17 publicly listed state-controlled companies with planned dividend pay-out ratios of between 10 and 50 percent.

Telkom, which is the country'€™s largest telecommunications operator, came second after state oil and gas PT Pertamina in terms of the value of dividends last year.

The telecommunications company paid dividends amounting to Rp 9.3 trillion last year or around 65.5 percent of its Rp 14.2-trillion net profits in 2013.

Pertamina, meanwhile, paid out Rp 9.5 trillion from its Rp 32.05-trillion net profits in 2013 as dividends last year.

Telkom president director Alex Sinaga said previously that his firm would leave the decision on the size of its dividend payout ratio in the hands of shareholders.

'€œWe are ready. The dividend payout ratio will be decided at shareholders meeting in the months to come,'€ he said.

Alex explained that lower dividend payments would help the company expand its business further as it would strengthen the firm'€™s capital base.

Telkom is set to lead the government'€™s drive for broadband projects worth Rp 278 trillion over the next five years to provide affordable Internet connections to the public.

The firm normally spends 50 percent of its annual capital expenditure of Rp 20 to 25 trillion on providing wireless Internet access (Wi-Fi); 30 percent on developing transmission cables, fiber-optic networks and satellites; and the remaining 20 percent on developing technological convergence.

Separately, PGN will allocate $800 million in capital expenditure this year to finance various projects, mostly gas-pipeline projects.

The projects will include the development and enhancement of gas pipelines in western and eastern Java, central Sumatra and Batam.

PGN will also continue plans to gradually develop a gas network for homes, as well as to support oil-based fuel-to-gas conversion in the transportation sector.

Commenting to the government'€™s plan to propose a dividend payment ratio of between 40 and 50 percent for his firm, PGN corporate secretary Heri Yusup said that his firm would discuss the matter in the next shareholders meeting.

'€œWe'€™ll leave it to the shareholders meeting that is scheduled to be held in April,'€ he told The Jakarta Post.