Bloomberg News

France Telecom Sticks to Dividend, Opposes Workers Plan

April 10, 2012

France Telecom SA (FTE) Chief Executive Officer Stephane Richard is opposing a proposal by workers to cut the 2011 dividend, saying that shareholders deserve an unchanged payout of 1.40 euros ($1.83) a share.

“I see no logical reason, whether economic or political, why we should deprive our shareholders of this return,” Richard said in an interview in Paris. “Our results in 2011 have given us the financial ability to pay 1.40 euros per share.” The company, which operates the Orange mobile-phone service, paid the same dividend a year earlier.

An investment fund representing workers which are also shareholders of France Telecom, the country’s biggest phone operator, has filed an resolution proposing to cut the dividend to 1 euro per share. The Adeas group, which owns about 5 percent of the company according to its website, said a lower dividend would allow increased investments. Shareholders will vote on the 2011 dividend at the June 5 annual general meeting.

On Feb. 22, France Telecom cut its dividend forecast for 2012 by as much as 14 percent, abandoned a promise to buy back shares and said it would shun acquisitions to hoard cash amid Europe’s debt crisis. The payout for this year will be in a range of 1.21 euros to 1.35 euros a share, the company said.

France Telecom is predicted to lower its dividend to 1.28 euros in 2012 and 1.20 euros in 2013, according to Bloomberg estimates.

State Influence

France Telecom rose 0.2 percent to 10.65 euros as of 12:01 p.m., while the French benchmark stock index, the CAC 40, declined 1.2 percent. The stock has dropped 12 percent this year.

European operators need to invest billions of euros in upgrading networks across Europe to handle a surge in demand for data transfer, putting pressure on how much cash they can return to shareholders and the dividend yields of their stocks, among the highest in Europe. Other phone companies that have announced dividend cuts include Spain’s Telefonica SA (TEF) and Telecom Italia SpA. (TIT)

France Telecom’s board of directors already approved the 2011 dividend proposal, Richard said in the April 6 interview. The company’s board includes employee representatives as well as French state representatives.

There are no plans to pay part or all of the 2011 dividend in shares, Richard said. The French State, whose 27 percent stake is split evenly between direct ownership and shares owned by sovereign fund Fonds Strategique d’Investissement, has not brought up such an option, the CEO said.

Paying in Shares?

This scenario, which is being discussed at European competitor Deutsche Telekom AG (DTE), is deemed unlikely at France Telecom as it could pose a problem if France was to cross the 30 percent mark of share ownership. Any shareholder passing that level has to launch an offer for all the shares, according to local market regulation.

Worker representatives at Deutsche Telekom are asking Germany’s government to forgo at least part of its almost 1 billion euros in annual dividend payments in exchange for a bigger stake in the former phone monopoly to help finance the cost of faster networks. Germany owns a 32 percent stake in the operator of the T-Mobile brand.

To contact the reporter on this story: Marie Mawad in Paris at mmawad1@bloomberg.net

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


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