Spanish incumbent Telefonica has said that that the company’s dividend announcement does not change its plans for divestments. The company continues to assess its operations to find non-core assets that could be divested, Telefonica CFO Angel Vila said…
Spanish incumbent Telefonica has said that that the company’s dividend announcement does not change its plans for divestments. The company continues to assess its operations to find non-core assets that could be divested, Telefonica CFO Angel Vila said during the company’s conference call on occasion of the dividend cut.
“Our idea to sell non-core assets is obviously to streamline our portfolio, and those disposals are aimed at enhancing financial flexibility and reducing our leverage,” he said, adding that it had not been thinking of paying the dividend out of these divestments.
He said that the company would proceed with disposals, “obviously at the right times and at the right prices”.
Just days ago US towerco American Tower agreed to acquire 2,500 Telefonica towers in Mexico for US$500m.
In November, Vila reportedly ruled out disposing of the company’s German or Mexican units, its business in the Czech Republic, or its 9.7% investment in China Unicom.
Telefonica announced yesterday that it was revising its shareholder remuneration targets set back in October 2009. This revision includes a cut to its dividend in 2012.
Telefonica’s dividend for 2011 will remain at €1.60 per share. €0.77 of which has already been paid. The rest will be distributed in May 2012 through a combination of cash and a payment-in-kind in the form of a distribution of treasury shares of Telefonica.
The remuneration for 2012 will equate to €1.50 per share, including a cash dividend of €1.30 per share and a share buyback worth €0.20 per share. The share buyback will be completed by May 2013.
The dividend target for 2012 had been €1.75 per share, according to a results document published by the company in 2009.
Telefonica added that the minimum total shareholder remuneration per share for 2013 would be similar to that of 2012.
It also reiterated the target of maintaining a leverage ratio in the 2-2.5x range.
Telefonica said that it was “maintaining an attractive remuneration for its shareholders which is compatible with Telefonica’s strategy of sustained investments in the business – including spectrum acquisition – to capture growth opportunities in our markets and enhances the Company’s financial flexibility”.
But this dividend strategy seems to reflect a change in policy since the company announced its most recent results in November.
In a results statement then, Telefonica said: “The Company reiterates its guidance for 2011 and confirms its shareholder remuneration policy.”
Kevin Yates, an analyst at RBS, estimated the savings for Telefonica from the dividend cut to be around €1.1bn per year. “They will continue with asset disposals on top of this to deleverage the balance sheet further,” he said.
In a note, Robin Bienenstock, a senior analyst at Sanford C. Bernstein, said: “We think Telefonica would benefit from asset sales, JVs or other transactions to ease the Company’s debt burden and leave them with a more manageable portfolio of better assets in which they are more able to invest.”
She added that Telefonica’s German asset was “subscale” and “would be better off in someone else’s hands or merged with another business to gain scale”.
