Telefonica Czech Republic AS fell to its lowest in almost nine years on speculation the phone company may follow Telekomunikacja Polska SA in cutting its dividend.
The Czech unit of Spain’s Telefonica SA is scheduled to publish full-year earnings and a dividend proposal on Feb. 27. The Polish company plunged 33 percent earlier today to an all-time low as it reduced its proposed payout after profit and revenue shrank more than analysts expected.
“Investors are worried that the unfavorable outlook for the telecommunications sector might prompt Telefonica Czech Republic to also lower its 2013 expectations and significantly curb its dividend,” Josef Nemy, an analyst at Komercni Banka AS in Prague, wrote in e-mailed comments today.
Telefonica Czech Republic dropped as much as 9 percent before paring its loss to 4.6 percent at 313.50 koruna, its lowest since July 2004. The stock was the most traded in the PX index, with volume at almost three times its daily average in the past three months.
Telecoms have been the worst performers in Europe in the past six months as regulators curbed termination rates and roaming fees. France Telecom SA, the owner of Poland’s Telekomunikacja, fell to its lowest in more than 10 years today.
Net income at Telefonica Czech Republic probably fell to 7 billion koruna ($370 million) last year, the least since 2005, from 8.7 billion in 2011, according to the median estimate of 16 analysts surveyed by Bloomberg. The company paid out 40 koruna a share last year, the same as in 2011 and 2010.
Today’s Telefonica selloff is “exaggerated” because there is “still a high probability” that the company will keep its 40 koruna payout, Tomas Mencik, an analyst at Cyrrus brokerage in Brno, Czech Republic, wrote in e-mailed comments.
While Telekomunikacja’s debt burden equals about one time its earnings before interest, tax, depreciation and amortization, the Czech company’s debt is “practically zero,” according to Komercni Banka’s Nemy.
“If Telefonica Czech Republic decides to keep its high dividend, it can afford it despite the negative development in the sector,” he said. “It can easily borrow money for that.”