Telefonica SA (TEF) shares tumbled 10.02% in pre-market trading on Tuesday, following the company's announcement of plans to halve its 2026 dividend. This drastic move is part of a new strategy aimed at reducing costs and cutting debt under the leadership of new CEO Marc Murtra.

The Spanish telecommunications giant revealed it would slash its 2026 dividend to 15 European cents per share, down from the current 30 cents. This decision marks a significant shift in Telefonica's financial strategy, prioritizing investment in operations and debt reduction over shareholder payouts. The company also outlined plans to base future dividends on a percentage of free cash flow after investments, signaling a more conservative approach to capital allocation.

Investors reacted negatively to the news, with Telefonica shares experiencing their worst one-day percentage fall since March 2020. The dividend cut puts Telefonica at odds with industry peers like France's Orange and the Netherlands' Royal KPN, which are increasing payouts. However, Telefonica defended its strategy, citing the need for investment in artificial intelligence, cybersecurity, and defense technologies. The company also announced plans to focus on four core markets - Spain, Germany, the UK, and Brazil - while targeting revenue growth of 1.5% to 2.5% annually from 2025 to 2028.