Spanish telecom giant Telefonica (Madrid, Spain) stuck to ambitious shareholder return targets on Friday even while nine-month profit fell a more-than-expected 69% in what the group described as a "challenging" operating environment.
The euro zone's biggest telecom in terms of market capitalization announced a 69% fall in net profit to $3.71 billion on a 5.4% rise in revenues to $63.7 billion in the January to September period, with net profit around $410 million below average expectations.
Telefonica still reiterated earnings targets for this year and confirmed its shareholder remuneration policy, widely questioned in the investment community. Analysts say that given roughly $75 billion in group net debt, ongoing investment commitments and an adverse environment for asset sales, the targets are not reachable.
Telefonica has promised a dividend of $2.4 per share in 2012 and has set a minimum shareholder remuneration target of $2.4 per share from then on.
"It's shocking they haven't lowered their guidance," said a London-based analyst who requested anonymity.
Profit was dented by a $3.6 billion charge to cut up to 6,500 workers at its Spanish unit as competing phone companies make deep inroads into its Spanish customer base.
In a statement, Telefonica blamed a tough regulatory environment and challenging business conditions amid sluggish economic growth, but said it was confident that a new business structure announced in September would soon produce efficiency improvements.
(Reporting By Elisabeth O'Leary; Editing by Judy MacInnes)