Telefonica SA (TEF) Friday pledged to increase shareholder returns with a EUR1.40 dividend next year, but revised downwards its guidance until 2012 amid falling revenue in mature European markets.

In a filing to the Spanish market regulator ahead of its Investors Day Friday, the Madrid-based company said its revenue compound annual growth rate, or CAGR, until 2012 would increase 1% to 4%. In its last Investor Day two years ago Telefonica had set out a revenue CAGR of between 5% to 8% for the period 2006 to 2010.

Telefonica also lowered its earnings per share target to EUR2.10 for 2010, down from previous guidance of EUR2.304.

But the company also said it would pay a EUR1.40 dividend for 2010, up 21.7% from EUR1.15 last time, and that its 2012 dividend would be at least EUR1.75 a share.

Telefonica has relied increasingly on solid revenue growth in its Latin American markets as an economic downturn hits its mature markets in Europe, especially in Spain.

Telefonica is Spain's largest telecommunications company by market value and customers.

Company Web site: www.telefonica.com

-By Jason Sinclair, Dow Jones Newswires, 34 913958127, jason.sinclair@dowjones.com