Telefonica (TEF) is planning to reduce its dividend as part of a strategy plan due next week in a move to align with its European telecom peers, Bloomberg reported Friday, citing sources familiar with the matter.

The move also targets to strengthen the company's balance sheet, free up cash for investments, and put more focus on financial discipline, the sources said.

Under the plan, the dividend yield target will be cut from an estimated 6.6% for 2026 and 2026 to about 4.8% for this year and around 5.2% for next year, based on the company's internally calculated average for the sector, according to the report.

The plan has been discussed with key shareholders, Bloomberg cited the sources as saying.

Telefonica declined to comment when contacted by MT Newswires.

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