Bloomberg News

Telefonica Cuts 2012 Dividend Amid Economic Turbulence in Europe

December 14, 2011

Dec. 14 (Bloomberg) -- Telefonica SA, Spain’s largest telephone company, cut its 2012 dividend forecast by 14 percent, citing market conditions that have changed “significantly.”

The 2012 payout will be 1.50 euros a share, including 1.30 euros in cash and the remainder via share buybacks, the Madrid- based company said in a statement today. The company had forecast a dividend of 1.75 euros. Telefonica still plans to pay a 2011 dividend of 1.60 euros.

Telefonica made the cut as tough market conditions in Spain and the European debt crisis are hampering the company’s earnings and its goals to reduce debt. Standard & Poor’s cut Telefonica’s debt rating in August by one level to BBB+, the third-lowest investment grade, citing lower expectations for cash flow and debt reduction and calling the company’s dividend policy “aggressive.”

The average dividend yield of European telecommunications companies is 7.5 percent, according to data compiled by Bloomberg. Telefonica’s yield of 11.3 percent is the fourth- highest after Cable & Wireless Communications Plc, Portugal Telecom SGPS and France Telecom SA.

Telefonica’s American depositary receipts fell 2.7 percent to $16.85 as of 12:08 p.m. In New York.

--With assistance from Jonathan Browning in London. Editors: Kenneth Wong, Simon Thiel

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net;

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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