Question-and-Answer Session
Operator
Thank you. We will now begin the question and answer session (Operator Instructions). Our first question is from Michael Meltz - Bear Stearns.
Michael Meltz - Bear Stearns
Thank you. I think I have three questions. Can you talk a little bit about the dividend and obviously-- well, this is no surprise--you were going to announce something today. Can you talk about how you got to the 25% figure in terms of a payout ratio and perhaps your thinking longer term as to how or if that could increase? That's my first question.
Second question, Dave, did you think national was actually up in Q3 or is going to up for '07? Can you clarify that a little bit?
Peter McDonald
National, we actually grew it in two of our businesses in Q3.
Michael Meltz - Bear Stearns
Okay. And then that plus, Dave, you said a 200 basis point swing for Dex and AT&T. What was that comment? You think you were actually up in Q3; I didn't understand; or the 26 states, I'm sorry.
David Swanson
Yes, I believe that the other 26 states, we had a 200 basis point improvement year-over-year, Michael, versus last year's Q3 performance, but I also said, both Dex and AT&T had modest declines for the quarter. The Qwest markets and AT&T, sorry.
Michael Meltz - Bear Stearns
Okay. And then the dividend question, can you talk a little bit about the rationale there, please?
Steven Blondy
Yes, well, clearly we are listening to our investors and we know that our investors value a direct return of capital. We still have a significant amount of leverage and we believe that 25% is a responsible dividend payout ratio and, as I said, it shares more than half of the annual value of the tax shield with our investors.
As far as longer term, Michael, the second part of your question, clearly, as we delever, we'll have capacity to consider increasing the payout ratio.
Michael Meltz - Bear Stearns
Okay, and what's the current thinking? What about capacity for buy backs as well?
Steven Blondy
Should the payout ratio increase that would allow us the ability to consider that as well.
Michael Meltz - Bear Stearns
I don't think I understand that.
Steven Blondy
Well, a 25% payout ratio, we are planning to allocate all of that to dividends. So, as we consider increasing the payout ratio, some of that increased amount could be allocated toward share repurchases.
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