Telefonica slashes 2016 and 2017 dividend payouts

Telefonica cut its dividend payouts for 2016 and 2017 following its inability to sell-of some of its assets, in a bid to ward off a ratings downgrade.

The Spanish telecommunications giant cut its divident payment for 2016 from 75 euro cents to 55 euro cents and projected a further reduction to 40 cents in 2017, retracting from previous promises from top management.

At €50bn as of 30 September its debt pile continued to cast a long shadow over the company, whose market capitalisation stood at approximately €45bn.

Quarter-on-quarter net debt was pared by €3bn.

An attempt to sell its O2 unit was stymid by the European Commission, which judged the transaction would boost prices and reduce the range of choices available to UK consumers.

Meanwhile, the attempt to hive off its Telxius infrastructure unit fared an even worse fate, after it failed to attract sufficient interest from potential investors.

For 2016 the payout will be done in two tranches, including a voluntary scrip dividend of 35 cents in November and a follow-on payment of 20 cents in the second quarter of 2017.

A 2017 40 cent dividend would be payable all in cash, divided equally between payments in the fourth quarter of 2017 and another in the second quarter of 2018.

Madrid-based Telefonica reported a 22% drop in net profits to reach €2.23bn for the first nine months of the year, as sales declined by 6.7% over that same time frame to reach €38.32bn, due to weakness in Germany and the UK.

In organic terms, revenues rose by 0.8%.

For all of 2016 the company led by José María Álvarez-Pallete projected free cash flow in excess of €4bn.

As of 1321BST shares in Spain´s incumbent telecoms operators were down by 2.20% to €9.05.