Telefónica to cut dividend for next year

In a surprise announcement on Wednesday, Spanish telecoms giant Telefónica said it will cut its planned dividend payment for next year as a result of significant changes to its operating environment.

In a statement to the National Securities Commission (CNMV), it said it would now pay a dividend on 2012 earnings of 1.50 euros per share, down from 1.75 euros, as it previously announced.

Telefónica said it would also pay a dividend of 1.50 euros per share in 2013. The 2012 dividend will consist of 1.30 euros in cash and the rest through a share buyback arrangement. The planned dividend for this year of 1.60 euros per share on this year's earnings will be maintained.

The dividend cut was announced after the Madrid stock market close, when Telefónica's share price was down 1.79 percent in line with the broad market.

"We set our previous dividend policy back in October 2009 when market conditions were very different from today's," Chief Financial Officer Ángel Vila said in a conference call. "Markets haven't clearly recognized our shareholders' remuneration efforts and we realized we need more flexibility."

The Spanish market remains weak due to faltering economic activity, while the outlook for the rest of Europe is uncertain.

Telefónica in November announced a quarterly loss in the third quarter of this year for the first time since 2002, but at the time chairman César Alierta pledged to maintain the dividend policy.