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By Leila Abboud and Gwénaëlle Barzic
February 22, 2012 9:42 AM EST
France Telecom
France has been locked in a mobile price war since mid-January, when Iliad
In addition, borrowing has become more expensive, especially after France lost its prized top credit rating, and the economic outlook is darker than a year ago, Chief Executive Stephane Richard told Reuters in an interview.
"The priority is to secure cash, especially since the European debt markets have been basically closed for the past six months," said Richard.
As a result, Richard predicted a "calm" year on the acquisition front, a shift from recent years when the company spent to expand in high-growth Middle Eastern and African markets.
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"The economic and competitive environment does not lend itself to major transactions," he added.
The new focus on hoarding cash also means France Telecom will not buy back shares in 2012 as it had promised investors it would after selling its Swiss unit to a private equity fund for $1.5 billion in December.
Dividends in 2012 and 2013 will be limited to 40-45 percent of operating free cash flow so as to allow the group to maintain its key debt ratio at two times operating profit.
France Telecom said this would likely lead to a dividend between 1.21 and 1.35 euros per share next year, down from 1.40 for 2011.
France Telecom's moves are a sign of the times as Europe's telecom operators struggle to find growth amid intense regulatory pressure and tough price competition.
Spain's Telefonica
Telecom Italia
SHARES RISE
Shares in France Telecom were up 2 percent to 11.68 euros at 1247 GMT as analysts welcomed the largely in-line 2011 results.
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