Telefónica Suspends 2012 Dividend and Cuts Compensation

The company, which made the announcement late Wednesday, had maintained a dividend payment despite a slump in domestic earnings since the start of the crisis. It said it would resume dividend payments in 2013, but at half of the €1.50, or $1.80, a share that had been foreseen for 2012.

Analysts had long called for Telefónica to cut or scrap its dividend payments, especially after recent credit rating downgrades by Standard & Poor’s and Moody’s Investors Service that have raised the cost for the company to refinance debt. Telefónica’s net debt stood at €58.3 billion at the end of June.

The company also canceled a share buyback program and released its latest earnings early. Profit for the first half of the year was down 34 percent, to €2.075 billion, the company said.

Telefónica said it decided to shelve its dividend and buyback plans after examining “the prevailing economic situation and financial environment which, for reasons beyond the company’s control, are proving highly unstable.”

It said suspending the dividend would save €6.8 billion.

In another move designed to save cash, Telefónica said it would reduce board members’ compensation by 20 percent and cut senior executives’ pay by 30 percent.

The company also has sizable operations in Latin America that provided almost half of its revenue in the first six months of the year.

After expanding aggressively in Britain, Brazil and elsewhere, Telefónica is now working to divest assets. Among the Spanish assets marked for sale is Rumbo, an online travel company, and Atento, a call center operator.

A year ago, Telefónica called off an initial public offering of Atento, citing volatile market conditions. In May, Telefónica’s board approved plans to sell shares in another subsidiary, 02 Germany, a wireless operator, as well as some of its Latin American telephone businesses.

Telefónica shares fell 5 percent in morning trading Thursday in Madrid but rebounded to close 3.4 percent higher at €8.95.