UPDATE 1-Telefonica Deutschland picks Nokia and Huawei for 5G network

Telefonica Deutschland on Wednesday picked Nokia of Finland and China's Huawei to build its 5G network, seeking to get work moving even though Germany has yet to finalize security rules governing the industry.

The decision by the unit of Spain's Telefonica comes amid a heated debate in Germany over whether to heed U.S. warnings that Huawei poses a security threat. Proposals under discussion range from tighter parliamentary scrutiny to a possible outright ban. Cooperation with the network vendors would be subject to both receiving the necessary certification in Germany, Telefonica Deutschland said, adding that this would enable it to make a start on building its network in early 2020.

"With this decision, Telefonica Deutschland is taking into account the fact that the political process has not yet been completed, without delaying the start of work on building the 5G network," the company said in a statement. Telefonica Deutschland said it expected to have 5G up and running in Berlin, Hamburg, Munich, Cologne, and Frankfurt by the end of 2021. By the end of 2022, 30 cities with a combined population of 16 million would be covered.

The company, which is holding an investor briefing in London later, said it would cut its 2019 dividend by 37% as it prioritizes network investments over the next three years. It will propose a dividend of 0.17 euros ($0.19), down from 0.27 euros last year, following similar cuts in the payout by competitors Deutsche Telekom and Vodafone.

This would become a new floor over the next three years, during which it expects cumulative revenue growth of at least 5%, while the ratio of capital investment to sales will peak at 17-18% before normalizing. Telefonica Deutschland reiterated its earnings guidance for the full year.

 

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