TDC Plunges Most in Almost a Decade as Dividend Is Dropped

  • CEO Erenbjerg moves to maintain TDC's investment-grade rating
  • Jefferies says dividend has been a key support factor

TDC A/S fell the most in almost a decade after the Danish phone carrier, which had branded itself a stock for investors seeking income, canceled a dividend payment and forecast a smaller-than-estimated profit this year.

TDC tumbled as much as 19 percent, the most since April 2006, making it the day’s biggest loser in the Stoxx Europe 600 Index. The shares declined 10 percent to 31.44 kroner as of 12:38 p.m. in Copenhagen, wiping about 2.9 billion kroner ($420 million) off its market value.

The news was “very disappointing,” Michael Friis Joergensen, an analyst at Alm. Brand Bank, said in a note. “After this we see very little reason to own the stock, besides that TDC could always be taken over.”

TDC said Wednesday it will drop its second dividend payment of 1.5 kroner a share “due to the continued deterioration in financial results expected for 2016.” The company already paid a 1 krone interim dividend for last year, and the company aims to maintain that payout for this year as well. 

Before today, TDC shares yielded about 7.2 percent annually based on the planned 2015 dividend of 2.50 kroner. At the lower rate, the stock now yields 3.2 percent.

The company, which is holding a capital markets day in London, also said earnings before interest, tax, depreciation and amortization will fall to 8.8 billion kroner this year. That compares with an average estimate of 9.2 billion kroner in a Bloomberg survey of 19 analysts.

Chief Executive Officer Pernille Erenbjerg is seeking to maintain TDC’s investment grade rating while making the company’s Danish business more competitive. The company said it will have a charge of 4.6 billion kroner for writing down the value of its domestic corporate business.

SEB AB cut the outlook on TDC’s BBB- rating to negative, saying there’s an increased risk the carrier will lose its investment-grade rating despite moves to keep it. Moody’s Investors Service rates TDC’s long-term debt at Baa3, one step above junk status, with a stable outlook.

One Month

In September, after a month in the top job, Erenbjerg was faced with the prospect of intensified local competition after larger Nordic rivals Telenor ASA and TeliaSonera AB called off a plan to merge their Danish operations following European Commission objections. Shares of both companies rose when the deal was announced in December 2014, and TDC also advanced on expectation competition in the market would become less intense.

Denmark’s three largest operators have reported multiyear declines in the premium post-paid segment, with TDC’s business arm particularly hard hit, according to Bloomberg Intelligence.

“In the face of difficult operating trends, the relatively high dividend has been a key support factor cited by the bullish side of the debate on the stock,” Jefferies analysts including Ulrich Rathe said in a note to clients. “The company’s very strong market position in Denmark leaves limited upside to organic trends.” Jefferies rates the stock hold.

Also on Wednesday, TDC announced a strategic review of its Swedish business. The overhaul may or may not lead to a sale, the company said.

Before it's here, it's on the Bloomberg Terminal.