Brazil will once again be one of the main cash generators for Telefónica in 2020. In document 6-K, sent this Monday to the US stock exchange authority (SEC), the operator indicates that it will pay shareholders this year with a total of 5.4 billion reais (about 810 million euros), despite the impact of the crisis generated by the Covid-19 pandemic.
The figure represents a payout 113.6%, between dividends and equity interest, a typical investor remuneration formula for Brazilian companies.
The amount of remuneration is slightly lower than the previous year. So, Telefónica Brasil paid a total of 5.8 billion reais, with a payout of 116%.
In any case, Telefónica Brasil defends its high payout, which reinforces its solid governance and shareholder remuneration practices. In the aforementioned 6-K report, the teleco indicates that the remuneration proposal assumes a dividend yield of 7%, more than three times higher than the local interest rate.
Under the plans in place, the operator will make the payment of a first tranche of 2,800 million reais on July 13, and a second disbursement of 2,800 million reais on October 5, as indicated in its corporate presentation for the month of March.
“We are one of the listed companies that pays the most dividends to its shareholders,” says Christian Gebara, CEO of Telefónica Brasil, who recalls that the company unified common and preferred shares in 2020.
The operator recalls that, during 2020, it repurchased its own shares in the market for an amount of 58.4 million reais.
Shareholders
The first recipient of these dividends will be Telefónica itself, which has a 73.58% stake in the capital: 29.76% through the parent company itself, 24.09% through the subsidiary Telefónica Latinoamérica Holding, a 19.67% through the SP Telecomunicações Participações holding; and 0.06%, through Telefónica Chile.
The remaining 26.25% (there is 0.17% in treasury shares) belongs to other investors, among which Artisan Partners Limited stands out, with 4.9% of the capital.
Telefónica Brasil also points to the promotion of fiber optic networks, as one of its strategic axes. Its goal is to reach the 24 million homes passed in 2024, after closing 2020 with 15.7 million. The teleco recalls that, at the beginning of March, it signed an agreement with the Caisse de dépôt et placement du Québec (CDPQ) for the sale of 50% of the capital of FiBrasil, the fiber investment vehicle created for the deployment of this technology. Telefónica will keep 50%; 25% through Infra and another 25% through the Brazilian subsidiary.
FiBrasil’s goal is to reach 5.5 million households in four years, compared to 1.6 million today, with Telefónica as the main customer.
GDP growth in 2021
In the aforementioned document, Telefónica Brasil alludes to the impact of the crisis in the country. Telefónica indicates that economic activity will continue to recover as the vaccination program advances. Thus, he points out that the Brazilian GDP could grow 3.5% in 2021.
The company points out that Brazil’s risk premium rose from 214 to 260 basis points in 2020, according to the JP Morgan EMBI index, and refers to one of the impacts that has suffered the most over the last year: the depreciation of the real against the dollar .
Thus, the teleco indicates that the exchange rate has gone from 4.03 reais per dollar at the end of 2019, to 5.20 at the end of 2020. This evolution has penalized the Telefónica group as a whole, when converting income or profits in Brazil to euros.
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