Telekom Austria (Vienna, Austria) has slashed its dividends by 87% in the same week that Mexican billionaire Carlos Slim secured a 23% share in the incumbent operator.
In a statement released this week, the company said it would cut its dividend from €0.38 to €0.05 per share this year and maintain that figure throughout 2013.
It blames an intensification of competition for the cut. “Together with adverse macro-economic conditions in central and eastern Europe, as well as regulatory pressure going forward, this is expected to have a material impact on the financial results and the cash flow generation in 2013,” it said in a statement.
Telekom Austria also plans to participate in a spectrum auction expected to take place next year, and needs to bolster its cash reserves for spending on new frequencies.
The company joins of several former state-owned telecoms monopolies that have slashed payments to shareholders in the past year.
Telefónica (Madrid, Spain), KPN (The Hague, the Netherlands), and France Telecom (Paris, France) have all blamed competition and regulation for dividend cuts they have recently made.
Austria stands out as one of the most competitive telecoms markets in Europe, with four network operators serving just 8 million people. The intensity of competition has already prompted Hutchison 3G (Hong Kong) to plan a takeover of France Telecom-owned Orange.
Even so, the tough conditions have not deterred Carlos Slim, the owner of Latin America’s América Móvil (Mexico City, Mexico), who this week increased his stake in Telekom Austria from 6.75% to nearly 23% after purchasing shares from RPR Privatstiftung, owned by Austrian investor Ronny Pecik.
The Mexican billionaire insists that his European investments are part of a long-term strategy to diversify his telecoms business geographically.
América Móvil raised its stake in KPN, which also operates in a small and competitive market, to nearly 28% at the end of June.
Slim could try to exploit synergies between his investments to boost their performance. Indeed, Telekom Austria was recently reported to be on the verge of holding talks with KPN on this issue.
Despite the dividend cuts, Telekom Austria has not altered its forecast for the financial year. It expects to make revenues of about €4.2 billion and earnings before interest, tax, depreciation and amortisation of between €1.4 billion and €1.45 billion.