TDC Plummets 19% after Ditching Dividend

TDC A/S (CPH: TDC) shares saw its biggest decline in nearly a decade, falling as much is 19%, after the Danish telecommunications company ditched its dividend payment and downwardly revised its profit forecast for the year.

TDC led the decliners on the Stoxx Europe 600 Index. Shares were down to 31.44 kroner, 10% lower, in the afternoon in Copenhagen, erasing 2.9 billion kroner ($420 million) from its market value.

The company announced on Wednesday that it will be dropping its 1.5 kroner-a-share dividend payment, citing “continued deterioration in financial results” as the cause. Last year, the company paid a one kroner interim dividend, and still hopes to maintain this payout in 2016.

Before Wednesday, annual yields on TDC shares were about 7.2% based on the 2.50 kroner dividend planned for 2015. With a lower rate, that yield drops to about 3.2%.

TDC also stated that earnings before interest, tax, depreciation and amortization was dropped to 8.8 billion kroner in 2016. Analysts were estimating 9.2 billion kroner.

PernilleErenbjerg, CEO of the company, is hoping to maintain TDC’s investment grade rating on improving the company’s competitiveness. TDC also noted a 4.6 billion kroner charge for writing down its domestic corporate business’s value.

TDC’s shares have been downgraded by SEB AB from a BBB- rating to negative, citing an increased risk of the company losing its investment grade rating. Moody’s Investors Service gave the company’s long-term debt a rating of Baa3, just one step above junk status.

Erenbjerg, who took over as CEO in August, now faces intensified local competition after TeliaSonera AB (STO: TLSN) and Telenor ASA (OTCMKTS: TELNY) axed their merger plans following objections from the European Commission. TDC shares advanced on news of the deal, as investors expected competition in the market would become less intense.

The three largest telecommunication operators in Denmark have all reported multi-year declines in their postpaid segment. TDC’s arm was hit particularly hard.

The company also announced on Wednesday that it would be performing a strategic review of its business in Sweden. The restructuring “may or may not” lead to a sale.

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Daniel Simmons