By Rodrigo Orihuela, Bloomberg

(Bloomberg) — Telefonica SA, Europe’s most indebted phone company, will cut its dividend after failing to sell its U.K. wireless unit and canceling a share sale for its towers and submarine cable business.

The decision is a turnabout for Telefonica, whose chairman said less than two months ago that the payout was sustainable, and shows the pressure the company is under to pay down debt. Telefonica will pay 40 cents a share for 2017, down 27 percent from the 2016 dividend of 55 cents, the Madrid-based company said in a statement Thursday. The company had previously said it would pay 75 cents against 2016 earnings.

Operating income dropped 1 percent in the third quarter to 4.18 billion euros ($4.56 billion) excluding depreciation and amortization, the company said in a statement. Analysts predicted 4 billion euros, according to the average of estimates compiled by Bloomberg. Sales fell 5.9 percent to 13.1 billion euros, matching the average estimate.

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