France Tel slashes dividend to cope with cash flow slump

PARIS Thu Oct 25, 2012 1:34am EDT

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PARIS Oct 25 (Reuters) - France Telecom slashed its dividend for this year and next in the face of tougher than expected competiton from a new low-cost mobile rival in its key domestic market and a weaker economic outlook.

It will propose a dividend of at least 0.80 euro per share in 2012 and 2013, instead of the 1.21-1.35 euros promised for 2012 in February, or the 1.4 euro paid last year.

Europe's fourth-biggest telecom operator predicted its operating cash flow next year would fall by roughly 1 billion euros ($1.30 billion) to hit 7 billion because of the "significant pricing impact" of the arrival of Iliad's low-cost Free Mobile service in January.

It predicted a return to growth of its operating cash flow in 2014 helped by a stabilisation of the French market, cost cutting, and the lightening of regulatory pressure on international roaming prices. ($1 = 0.7711 euros) (Reporting by Leila Abboud, Gwenaelle Barzic; Editing by Christian Plumb)