British telecommunications conglomerate Vodafone has recorded a full year loss and has cut the payout to its shareholders for the first time in the history of its operations. The dividend was reduced by nine-euro cents per share to 15.07 euros. Shareholders were assured last November by Nick Read, the new Vodafone CEO, to expect no change in the payout. Of course, the reduction is a contradiction of this pledge. Currently, Vodafone is known for issuing one of the highest dividends in the United Kingdom.
Only a year ago, the telecommunications giant was looking at profit of 2.8 billion euros. The loss for this year, however, amounts to 7.6 billion euros and it has been mainly attributed to a less than stellar transaction in India. Additionally, the value of investments saw a reduction in both Romani and Spain.
Since the inception of its operations, Vodafone has been expanding and has been racking up debt as a result. It purchased broadband organizations in both Spain and Germany and is incurring high expenses as it moves to build 5G networks. Furthermore, the company is in the process of taking over assets of Liberty Global, which is the company’s biggest deal since 2000.
While all of this has resulted in mounting debt, Read is adamant that the group is simply in a state of transformation. He has indicated that the company has moved to lower operational costs and is attempting to capitalize on cross-sell opportunities as measures to lower the debt.
Read also went on to state that the dividend is simply being “rebased” to facilitate the company’s growth as it aims to lower its debt.
Chief IG Market Analyst, Chris Beauchamp, in a review of the summed up the entire situation by stating that the heavy expansion that Vodafone has been doing generated massive expense requirements, and so the dividend cut is being used to help pay off the debt.