Telefónica omits dividend, cuts executive pay due to domestic crisis

Telecoms company Telefónica on Thursday announced that out of “prudent administration” it had decided to cancel the planned dividend payments on 2012 earnings as it seeks to speed up the reduction in its debt, in an environment in which the Spanish economy is expected to remain in recession for the next two years.

The Spanish corporate giant also announced pay cuts for top managers, including 20 percent for board members and 30 percent for the chairman and other executive directors.

Telefónica said it would resume its dividend program with a payment of 0.75 euros per share drawn on 2013 earnings. The company also announced its earnings for the first half a day ahead of schedule. Telefónica’s net income in the period declined 34 percent from a year earlier to 2.075 billion euros.

“In the current extremely challenging economic and financial environment, exogenous factors are creating severe instability and are exacerbating potential financial risks,” Telefónica said in a statement to the National Securities Commission. “Since those unprecedented factors are beyond Telefónica’s control it is crucial that the company takes definitive steps to effectively defuse potential risks.”

Telefónica is also in the process of selling non-strategic assets to reduce its debt, including its call-center unit Atento.