Telefonica Czech Republic AS (BAATELEC.PR), a unit of Spain's Telefonica SA (TEF), Friday said it may buy back up to 10% of its shares in addition to its just-announced cash dividend.

"On top of the 40 koruna per share cash payment we're asking the AGM for a generic stock buyback of up to 10% of shares," company Chairman Luis Antonio Malvido said in a conference call.

The company proposed a CZK40 ($2.1) per share dividend, comprising an ordinary dividend of CZK27 per share from 2011 profit, and a payout of CZK13 per share to reduce capital because of an excessive cash position, he said.

Earlier Friday, the company posted a fourth-quarter net profit of CZK2.87 billion, beating market expectations of CZK2.20 billion and up from CZK1.91 billion a year earlier.

"At this stage we don't plan to do [the buyback], but we want to keep ourselves flexible," Malvido said, adding the buyback could be leveraged.

"To give the best shareholder remuneration...we're starting with a share capital reduction and at this stage we're just evaluating the 10% [buyback]," he said, adding the company would provide more details after the AGM later this year.

If the share purchase plan takes place it would be in the second half of the year, Malvido said, adding it would be limited to shares trading on the secondary market.

-By Sean Carney, Dow Jones Newswires; +420 222 315 290; sean.carney@dowjones.com

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