* Spain could see 20 pct workforce reduction
* Mobile and data penetration seen booming in Latam
* Share price dips
(Recasts lead, adds analyst reaction at end of investor
By Elisabeth O'Leary and Sarah Morris
MADRID, April 14 Telefonica is betting on
lucrative smartphones and a Latin American data boom to continue
to fuel growth but investors were uninspired on Thursday by the
operator's earnings targets and dividend guidance.
In Spain, it will slash costs by reducing its workforce and
its wages bill, boosting productivity along the way, the
ex-state monopoly told a two-day investors conference in London
Executives told investors on Wednesday it was aiming for 1-4
percent compound annual growth in group revenue from 2010-2013,
primarily based on expected 30-35 percent growth in mobile data
services. [ID:nLDE73C1E0] It reported group revenues of almost
61 billion euros in 2010.
It did not give detailed guidance to 2013 by country.
The stock closed down 1.06 percent on Thursday at 17.81
euros, compared with the STOXX Europe 600 telecoms sector index
.SXKP which was down 0.29 percent.
"We've heard nothing fundamentally new and there is a
realisation that Spain is going to be bad for a long time," said
Robin Bienenstock, analyst at Bernstein Research.
The traditionally bullish company said it is not now
expecting the tough competitive backdrop in Spain to get worse.
Telefonica employs about 32,000 people in Spain, and says it
has flexibility to cut that figure by 20 percent over 3 years.
Its Spanish market share has declined as unemployment has
soared to affect one in five and customers have looked to save
on mobile and internet bills by signing up with cheaper rivals.
Graphic on r.reuters.com/baf88r
Graphic on r.reuters.com/fyj98r
In Brazil, which accounts for half of its Latam revenues,
Telefonica is hoping to make the most of an expected 8
percentage point gain in mobile broadband smartphone penetration
by 2013, while mobile data use is expected to expand 23
percentage points in the same period.
"The data explosion is already here but we also tend to take
the opportunity to exploit the growth of traditional services,"
said Jose Maria Alvarez-Pallete, head of Telefonica's Latam
unit. "The good news is that in Latam, growth is everywhere."
POSTIVE, BUT SHORT ON SPECIFICS
Brazil's economy grew 7.5 percent last year, although it is
expected to slow to around 4.5 percent in 2011 according to the
International Monetary Fund, as interest rate hikes and sizeable
cuts to the country's 2011 budget kick in.
That compares with a paltry 0.7 percent economic growth in
Spain this year, according to an average of private economists.
Telefonica's main attraction to investors at present is its
high dividend yield, around 9.6 percent on 2012 estimates,
according to Datastream, versus a sector average of 6.4 percent.
Telefonica pledged on Wednesday to keep shareholder returns
at an equivalent of 1.75 euros per share minimum beyond 2012.
"I think that the market was underwhelmed by the mix in
terms of dividend-share buyback," said one Madrid-based senior
"I don't see it collapsing dramatically mainly because the
yield support is there."
However, some analysts are still sceptical that the dividend
Telefonica has offered is justified at its current share price
given a tough operating outlook in Europe.
"TEF is guiding for a growth profile that will not be
materially different from peers', we believe, and has now
created a (remuneration) cap and some uncertainty on the DPS
(dividend per share) after 2012. By then, we think other names
could offer similar cash returns," Exane BNP Paribas said in a
note to clients.
(Writing by Elisabeth O'Leary and Sarah Morris, graphics by
Vincent Flasseur; Editing by Mike Nesbit and Jon Loades-Carter)