* Says impairment charge will not affect operations
* Will use cash from dividend elimination to reduce debt
* Will still pay C$0.025 per share dividend on Oct. 17
* Shares down 49 percent (Adds analyst comment, recasts)
By Bhaswati Mukhopadhyay and Pav Jordan
Sept 28 (Reuters) - Yellow Media Inc YLO.TO, the Canadian telephone directory publisher struggling to survive in the digital age, said on Wednesday it would take a C$2.9 billion ($2.8 billion) charge in the third quarter, sparking a 50 percent fall in its stock price.
Yellow Media also said it will stop paying dividends after its October payment as it struggles to switch from print to a digital platform, while trying to manage its debt.
Shares in the company, which gets about three-quarters of its revenue from selling advertisements in its Yellow Pages and related business directories, plummeted 49 percent to 29 Canadian cents in late-morning trade in Toronto on Wednesday.
The stock was down more than 50 percent at the open and is worth about 50 times less than it was in 2007, when it traded at around C$14.
The company has faced declining demand for print ads in its Yellow Pages and related directories and has had difficulties selling online ad space and coaxing advertisers to buy prime placements on its mobile platform.
At the same time, it faces growing competition online from such giants as Google Inc (GOOG.O).
"It's definitely, going forward, a company that will face a higher degree of earnings volatility," said Madhav Hari of Standard & Poor's Ratings Services.
In August, Standard & Poor's cut its credit rating on Yellow Media, which is grappling with C$2.16 billion in debt, to 'BB+' from 'BBB-' [ID:nL3E7J4381].
The Standard & Poor's cut came around the same time that Yellow Media reported second-quarter results that missed analysts' expectations, slashed its dividend and suspended share buybacks.
Five Canadian financial institutions cut their share price targets on the company soon after.
"The last few months and the last week have been very challenging and we are disappointed with the performance of our securities as regards to all of our stakeholders," Yellow Media President and Chief Executive Marc Tellier said on a conference call with analysts before the market opened on Wednesday.
"In essence, our message today is one of conviction," he said. "One of conviction that we have the right strategy and focus around our business transformation."
Tellier ended his short call with analysts abruptly, promising to provide further details on the company's transformation when it publishes third-quarter results in November. He took no questions.
"The announcement today doesn't improve the low visibility that we have already on the company," Desjardins Securities' analyst Maher Yaghi told Reuters after the call.
"Until we are convinced that the road to positive organic growth is clearly established -- which we are unable to forecast at this time -- we maintain our view that trading in the shares is a speculative endeavor," Yaghi said.
Yellow Media said the C$0.025 dividend per common share that it announced in August remains payable on Oct. 17.
$1=$1.02 Canadian Reporting by Pav Jordan in Toronto and Bhaswati Mukhopadhyay in Bangalore; Editing by Roshni Menon and Peter Galloway