Telecoms operator Telefonica trimmed its planned 2012 dividend on Wednesday in a move to keep its debt under control as the telecoms group battles sluggish economic growth in its home market and uncertainty in Europe. Spain's largest telecom company last month blamed a tough regulatory environment and challenging business conditions for a weak nine-month performance, but had promised to stick to its shareholder return targets.
It now says "significant changes" in financial markets and the economic and operating environment prompted the need to bring forward a more flexible remuneration scheme that had been initially planned for 2013. Telefonica (Madrid, Spain) said it would pay a total 2012 dividend of $1.94 per share, down from the $2.3 previously planned, and pledged to maintain that in 2013.
"We believe this policy is compelling and compatible with sustained investments and enhances our financial flexibility," Chief Financial Officer Angel Vila said on a conference call.
Spanish companies are struggling to obtain fresh funds in a long-running credit freeze. Credit ratings agency Standard and Poor's (New York) downgraded Telefonica in August as Spanish consumers opted for cheaper tariffs and rival agency Fitch followed suit in September.
The $1.94 dividend for 2012 will include $1.6 in cash and the remainder via a share buy-back plan.
Spain's biggest company by market capital held to its dividend of $2.08 for 2011 and said it planned to keep its debt ratio between 2.0 and 2.5 times operating income before depreciation and amortization (OIBDA).
Vila told investors the company continues to assess its asset portfolio but declined to give any details on potential disposals. He repeated the company's earnings guidance for 2011.
(Reporting by Tracy Rucinski; Editing by Martin Roberts and David Holmes)