D. Telekom hopes investments will soften dividend blow

Fri Dec 7, 2012 8:50am EST
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By Harro Ten Wolde

BONN, Germany (Reuters) - Deutsche Telekom hopes major investments in Germany and the United States and a long-awaited iPhone deal will turn around its fortunes, compensating for the dividend cut it plans to pay for them.

The company said it would increase investments by more than an annual 1 billion euros ($1.3 billion) to 9.5 billion euros in 2015 from an estimated 8.3 billion euros this year, rolling out faster broadband and next generation 4G networks, as it cut its dividend by almost 30 percent.

European peers Telefonica, hit by a 17.8 percent fall in nine-month Spanish mobile revenues, the Netherlands' KPN, Telekom Austria, and France Telecom all cut dividend payments earlier this year.

"There is a clear difference with our European competitors. We are investing in the future, our peers are forced into defense mode," Chief Executive Rene Obermann told reporters.

Still investors, who had expected the dividend to be lowered to 0.60 euros per share for 2013 from 0.70 for 2012 and 0.58 euros for 2014, were disappointed with the 0.50 euros on offer.

Deutsche Telekom shares were down 3.3 percent by 1230 GMT, at the bottom of a 0.6 percent weaker sector index.

The dividend cut will save Deutsche Telekom about 850 million euros annually, analysts at FitchRatings said, adding the fact that investments were financed via dividend cuts was good for bondholders.

Yields on the company's 6-year and 12-year bonds were unchanged on Friday.   Continued...