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Telekom Austria Cuts Dividend by Half, Confirms Forecast

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Dec. 16 (Bloomberg) -- Telekom Austria AG cut the minimum dividend it will pay for this year and 2012 by half to 38 euro cents ($0.50) a share, citing an adverse economic environment and investments that will weigh on cash flow and increase debt.

Austria’s former telephone monopoly, which had previously planned to pay at least 76 cents a share, will pay a dividend of about 55 percent of free cash flow from 2013 as long as this doesn’t lead to a “deterioration of group equity,” Vienna-based Telekom Austria said in a statement today. The company reiterated its guidance for 2011.

Telekom Austria’s move comes two days after Spain’s largest telecommunications company, Telefonica SA, cut its dividend for the first time in a decade as consumers and corporations trim spending amid Europe’s sovereign debt crisis. Austrian investor Ronny Pecik, who owns 15.8 percent of Telekom Austria, told weekly magazine Format today that he’s aiming for a 25 percent stake and that the company’s dividend policy is “excessive.”

“An adverse macro-economic environment as well as highly volatile foreign-exchange markets will continue to affect Telekom Austria’s operations for the foreseeable future,” the company said in the statement. “Anticipated significant investments, such as upcoming spectrum auctions, are expected to lead to pressure on cash flows as well as a material increase of Telekom Austria’s leverage beyond its target corridor.”

Telekom Austria’s dividend yield before the cut was 8.3 percent, more than the average of 6.3 percent for European telephone companies, according to data compiled by Bloomberg.

The company said its supervisory board also discussed a plan to improve operational performance. The plan will be presented in February.

Telekom Austria still forecasts earnings before interest, taxes, depreciation and amortization of 1.55 billion euros this year.

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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