ECONOMY

OTE plays it safe, cuts dividend

In a surprise move yesterday, OTE telecom unveiled plans to slash its 2009 dividend in a bid to protect its cash position during the downturn, raising concerns among investors that more Greek companies will follow suit, harming annual returns on equity portfolios. OTE telecom, 30 percent-owned by Deutsche Telekom, said in a statement yesterday it will propose to shareholders paying a 0.19-euro-per-share dividend for 2009 versus 0.50 euros, as announced earlier this year. «Given the change in circumstances arising from the austerity measures… and the resulting uncertainty from a macroeconomic perspective, the board has decided to intensify efforts aimed at cash preservation,» OTE said. Austerity measures unveiled by the government earlier this year, such as salary cuts for civil servants, have weighed heavily on consumption, resulting in a drop in revenues for the telecom sector. The company said a special tax on earnings will result in a 96-million-euro layout this year. News of the lower dividend helped send OTE’s stocks tumbling 11.69 percent on the Athens bourse to 5.74 euros, versus a drop of 5.45 percent on the broader market. «It is logical that OTE wants to hold onto its cash right now for future needs, such as staff restructuring efforts,» said an analyst at an Athens brokerage. «The market is also pricing in the possibility of other companies making the same decisions. A drop in profits has already been largely discounted but not a cut in dividend payments, like in the case of OTE,» he added. Shareholders will vote on the dividend in a general assembly scheduled for June 16.