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Telefónica has cut its dividend by a quarter as the Spanish telecommunications group seeks to preserve its cash flow to complete a major overhaul of its business.
Revenue for the year ending December fell 11 percent to 43 billion euros and 12 percent in the fourth quarter to 11 billion euros. Pre-tax profit fell 5% to 2.6 billion euros for the year, although it more than doubled to 1.2 billion euros in the past three months.
The annual declines are attributable to the impact of Covid-19 with roaming revenues dropping sharply due to lower ridership and lower smartphone upgrade rates. Telefónica said the pandemic during the year resulted in lost revenue of € 1.9 billion and cost it nearly € 1 billion in operating profit, Spain, UK United and Brazil being the most affected by the losses.
“We were able to deal with the unexpected,” said José María Alvarez-Pallete, Executive Chairman.
The Spanish group mentioned a stabilization of turnover and operating income in 2021 by recovering from the disruption, but nevertheless reduced its dividend to € 0.30, against € 0.40 that it had paid the year last in cash and shares as he continues to restructure the company.
Telefónica has been involved in two of the biggest deals in European telecommunications over the past year after agreeing to merge its UK O2 mobile network with Liberty Global’s Virgin Media cable division and sold its towers division Telxius mobile phones at American Tower for 7.7 billion euros. month.
It has also created separate divisions for technology and infrastructure and signed co-investment agreements in fiber with financial companies in markets like Germany. Telefónica acquired parts of its Brazilian rival Oi during the year, but also began to dismantle its chain of operations in Latin America.
The company’s debt, which has weighed on it for years, fell by € 2.5 billion in total to end the period at € 35 billion in net, a figure which excludes rental debts. Transactions like Telxius will reduce debt by an additional € 9 billion.
Georgios Ierodiaconou, analyst at Citigroup, said Telefónica’s figures were slightly higher than expected. “The focus will be on how Spain should behave within the mix. The dividend policy should receive a mixed response, ”he said.
O2 in the UK saw its revenue decline for the first time in five years, but nonetheless increased its margin over the period despite the impact of Covid-19.
Rivals Sky and Vodafone opposed the merger of O2 and Virgin Media on the grounds that it could reduce competition in the market from “virtual” operators who lease capacity on a mobile network to provide their own services.
Mark Evans, managing director of Telefónica UK, told the Financial Times that Vodafone has made similar cable-mobile deals in markets such as Germany and the Netherlands and said there would still be four mobile networks for virtual operators such as Sky. after the merger. “Is there less competition? The answer is no, ”he said.
Shares of Telefónica were up 4 percent early in Thursday.
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