Telefonica cuts dividend as pandemic crimps 2020 earnings

Telefonica TEF.MCposted a 10% fall in 2020 earnings on Thursday and while the Spanish telecoms group expects the business to stabilise this year, it plans to lower its dividend.

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

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 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 lowered its proposed dividend on 2021 earnings to 0.30 euros per share from the 0.40 euros it paid for 2020.

CEO Jose Maria Alvarez-Pallete said he was expecting revenue and OIBDA to stabilise this year, and the ratio of capital expenditure to sales to settle at 15%.

“In 2020, we have been put to the test,” he said. Reuters