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Telefónica shoots up its profits and cuts the dividend to shareholders

Telefónica increases its profit by 38.5% in 2020, to 1,582 million euros, despite a reduction in its income of 11% that puts the operator’s business at 43,076 million.

Telefónica has improved its profit in the year of the pandemic by 38.5%, to 1,582 million euros. The operator has achieved better results even with a decrease in revenue, which amounted to 43,070 million euros in 2020, 11% below the turnover of the previous year.

The company chaired by Josà © MarÃa à ?? lvarez-Pallete has also decided cut its dividend to shareholders by 2021 by 25%, from 0.40 to 0.30 euros, maintaining in any case the formula of scrip dividend or flexible dividend (which consists of a voluntary collection in dividends or shares and which was abandoned in 2016 to be recovered last year). The operator argues that next year will be investments in networks and also in spectrum within three fundamental markets for the company: Spain, the United Kingdom and Brazil. “We want to maintain a strong investment grade for the rating agencies,” à ?? lvarez-Pallete acknowledged at a press conference to present these figures.

Compensation for next year would be paid in two tranches: 0.15 euros per share in December 2021 and 0.15 euros in June 2022. The dividend corresponding to 2020 remains at the agreed total of 0.40 euros .

OIBDA (operating profit before amortization interpretable as EBITDA) stood at 13,498 million euros, 10.7% less than in 2019.

The explanation for the rise in results, despite the covid and those decreases in revenue and OIBDA, is also due to the extraordinary negative impact that two operations had on 2019 results: the agreement with AT&T in Mexico to be able to use your mobile access network infrastructure and the Individual Suspension Plan (PSI), a voluntary termination program which has affected more than 2,600 employees.

Telefónica has managed to continue reducing its net financial debt, which in 2020 has dropped by 2,500 million and has decreased by around 17,000 million in the last four years. In fact, the telecommunications company expects to reduce its debt by another 9,000 million euros if its two large pending operations (merger in the United Kingdom and sale of Telxius towers) obtain the approval of the authorities, with which the net financial debt would fall from 35,000 million announced to 26,000 million.

The company solves its stagnation with a capacity to generate cash that à ?? lvarez-Pallete values ​​especially. The operator generated 1,222 million euros in the first six months, but in the second half of the COVID year it already reached 3,572 million, thus adding a total of 4,794 million euros in the year. In the last quarter of the year, free cash flow reached 1,993 million, a sign of the company’s potential to generate profitability without the need to rely on financing. In the last five years, Telefónica has achieved a total cash of 25,000 million euros.

“It has been an exceptional year, a year in which we have been put to the test. Much was expected of Telefónica and Telefónica has made the cut. We have been on the side of society, where it had to be. We have complied and we have continued to advance, “said à ?? lvarez-Pallete.

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