Telefonica plans to cut dividend as earnings drop

MADRID: Telefonica posted a 10% fall in 2020 earnings on Thursday and plans to cut its dividend even though the Spanish telecoms group expects its business to stabilise this year.

Telefonica, like its European peers, was struggling to post strong growth even before the pandemic struck, and is focusing on stoking expansion in Brazil, Britain, Spain and Germany and selling assets to cut debt and fund an upgrade to next-generation 5G networks.

So far this year it has cashed in on keen investor appetite for infrastructure, selling more than 30,000 mobile masts and a stake in its Chilean fibre optic network to help shrink the debt it racked up building some of that hardware originally.

Debt now stands at around 2.6 times 2020 operating income, and “the commitment to improvement does not stop there”, Chief Executive Jose Maria Alvarez-pallete said in a statement.

“The operations pending completion in 2021 will generate around 9 billion euros to further reduce debt,” he said.

Earnings improved later in the year as the initial impact of the health crisis and lockdowns eased, but the company still calculated it had lost 977 million euros ($1.19 billion) in operating income due to lower service revenue and handset sales.

Operating income before depreciation and amortisation (OIBDA) fell 10% to 13.5 billion euros, including a 1.2 billion-euro hit from unfavourable exchange rates.

In response Telefonica cut its proposed dividend on 2021 earnings to 0.30 euros per share from the 0.40 euros it paid for 2020.