Telecom Italia, cut its dividend by 25 per cent, reversing its pledge for a 15 per cent increase and mirroring moves by peers, as it battles to reduce over 30 billion euros of ($41 billion) of debts in the midst of an economic downturn.
Italy, whose economy has fallen into recession due to a sovereign debt crisis, was hit by credit rating cuts in 2012, making debt reduction even more of a priority for Italy’s largest telecom firm to prevent a costly downgrade.
The Rome-based group on Friday cut its 2011 dividend to an overall sum of 900 million euros, and confirmed its target of reducing net debt to about 25 billion euros in 2013. It did not give a dividend per share figure.
Expansion and double-digit per centage growth in South America, coupled with cost cuts, more than offset a decline in its biggest Italian market, allowing Telecom Italia to post a rise in revenues and core earnings.
The dividend decision mirrors similar moves by other telecoms firms in Europe, which dropped generous payouts to counter a negative mix of economic recession, competition and costly network upgrades in their mature home markets.
Total core earnings rose 7.3 per cent in 2011 to 12.25 billion euros and revenues rose 8.7 per cent, both matching analyst expectations.