UPDATE: Telefonica To Increase Dividend, Lowers Outlook
October 09 2009 - 3:57AM
Dow Jones News
Telefonica SA (TEF), Europe's largest telecommunications company
by market value, 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 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.
Analysts were upbeat on Telefonica's forecasts. Banesto, in a
research note, described the dividend guidance as a "positive
surprise," adding the shares would likely react well, at least in
the short term.
At 0723 GMT, Telefonica shares traded up 1.6% at EUR19.54,
outpacing a higher overall Spanish market.
In a separate presentation, Telefonica said it would use any
additional cashflow for a future share buyback, but didn't provide
further details. Telefonica in the past has used aggressive
buybacks to reward shareholders. The company said it targets a free
cash flow in excess of EUR40 billion between 2009 and 2012.
Telefonica also said it would be selective with mergers and
acquisitions, limiting this to consolidation in markets where it
already operates and to spectrum auctions. The company also
reiterated it wants to increase its stake in China Unicom to 10%
from the 8.4% it has now, giving it a stronger foothold in the
world's largest telephony market.
In a show of force, Telefonica bid $3.7 billion for Brazilian
telecommunications company GVT Holding SA (GVTT3.BR) Wednesday, in
a move to preserve its market share in Brazil, topping a previous
bid from French media and telecoms conglomerate Vivendi SA
(VIV.FR).
Telefonica has relied increasingly on solid revenue growth in
its Latin American markets as the economic downturn, regulation and
increased competition hits its mature markets in Europe, especially
in Spain.
Company Web site: www.telefonica.com
-By Jason Sinclair, Dow Jones Newswires, 34 913958127,
jason.sinclair@dowjones.com