Orange slashes dividend as coronavirus takes its toll

With more people working at home than ever before, telecommunications services have rapidly become even more integral to our daily lives. As a result, one could be forgiven for thinking that network operators should be raking in the profits during this turbulent time. 

 

But the reality is very different. Operators are hurting too, with pandemic disruption negatively affecting many aspects of their traditional revenue streams; for example, travel restrictions have seen roaming revenue has taken an enormous hit, forecasted to cost the industry around $25 billion this year alone.

 

On Friday, Orange has become the first major operator to cut its dividend, reducing it by 30% for the 2019 financial year.

 

In the past month, the operator has been under pressure from both the French government and union representatives to drop the dividend completely. 

 

“If you do not have the cash to pay tax or social security charges, then you also don’t have cash to pay your shareholders, so don’t pay a dividend,” said Finance Minister Bruno Le Maire last month.

 

However, a compromise position was ultimately agreed upon after much negotiation.

 

“We had to pay something,” explained Orange CEO Stéphane Richard. “It is good news in the current context. There will be few companies, especially with public ownership, that will pay a dividend.”

 

Orange reiterated its strong financial position, saying that, while the disruption was severe, it would not impact upon their 2020 forecast.

 

Many more major operators will likely cut their dividends too, with BT expected to do likewise in the near future.