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France Telecom Won’t Reduce Investment Amid Dividend Cut

June 05, 2012

France Telecom CEO Stephane Richard

Stephane Richard, chief executive officer of France Telecom SA. Photographer: Antoine Antoniol/Bloomberg

France Telecom SA Chief Executive Officer Stephane Richard said the phone company’s 2012 dividend will be reduced “reasonably” and the owner of the Orange brand won’t sacrifice investments as it responds to price cuts by Iliad SA. (ILD)

“For 2012, it is clear that we will lower the level of our dividend to take into account how our results evolve,” Richard said in an interview with BFM Business Radio. “Our dividend will go down reasonably.”

With one of the highest dividend yields in the telecommunications industry in Europe, Paris-based France Telecom has been under pressure to cut payouts to preserve cash as Europe’s debt crisis hurt consumer demand. Telefonica SA (TEF) last week slashed the cash portion of its 2012 dividend by 69 percent and announced plans to spin off its German and Latin American assets to accelerate debt repayment. Telecom Italia SpA (TIT) announced cuts to its 2011 dividend in February.

France Telecom said on Feb. 22 that its 2012 payout will be in a range of 1.21 euros to 1.35 euros a share, cutting the forecast from 1.40 euros a share, because of a projected decline in operating cash flow. At the annual shareholders’ meeting in Paris today, Richard reiterated the company’s forecasts for 2012, including a plan for payouts of 40 percent to 45 percent of operating cash flow.

Employees’ Proposal

Shareholders today approved a dividend of 1.40 euros a share for 2011. An investment fund representing workers who are also investors had filed a resolution proposing to reduce the payout to 1 euro a share.

Richard said at the meeting that the dividend for 2012 will probably exceed 1 euro a share.

France Telecom fell 0.2 percent to 10.25 euros at the close in Paris. The stock has declined 16 percent this year, valuing the company at 27.2 billion euros ($33.8 billion).

The dividend yield is 13.6 percent, compared with an industry average of 9.3 percent and 13.9 percent for Madrid- based Telefonica, according to data compiled by Bloomberg.

The phone company has “no intention of conducting share buybacks” this year, Chief Financial Officer Gervais Pellissier said at the annual meeting.

To contact the reporter on this story: Marie Mawad in Paris at

To contact the editor responsible for this story: Kenneth Wong at

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