Telekom Austria has become the latest major operator within the eurozone to cut its shareholder dividend, citing an “adverse macro-economic environment” as well as the need to preserve cash for future investments.
Austria’s largest fixed-line and mobile player said that it will cut the minimum dividend it will pay in 2011 and 2012 to EUR0.38 per share, down from EUR0.76. It will pay a dividend of about 55 percent of free cash flow from 2013 as long as this does not lead to a “deterioration of group equity.” But it was able to reiterate its guidance for 2011.
“An adverse macro-economic environment as well as highly volatile foreign-exchange markets will continue to affect Telekom Austria’s operations for the foreseeable future,” the company said in the statement. “Anticipated significant investments, such as upcoming spectrum auctions, are expected to lead to pressure on cash flows as well as a material increase of Telekom Austria’s leverage beyond its target corridor.”
Telekom Austria’s move came just a few days after Spain’s Telefonica cut its dividend for the first time in a decade.
Investment bank Nomura predicted that other European operators could follow Telefonica’s lead in slashing dividends amid the eurozone’s sovereign debt crisis, citing Telecom Italia and Belgacom as possible candidates to do so.
However, Bloomberg suggests that Telekom Austria’s move may have also been prompted by comments from local investor Ronny Pecikm, whose investment vehicle is reporting mulling a takeover of the company.
Pecik, who owns 15.8 percent of Telekom Austria, told weekly magazine Format on Friday that he is aiming for a 25 percent stake and that the company’s dividend policy is “excessive.”