* Reinstates quarterly dividend, to pay C$0.365 per share
* Announces new share buyback program
* Sees cost reductions saving about C$400 million
By Wojtek Dabrowski
TORONTO, Dec 12 (Reuters) - BCE Inc (BCE.TO)(BCE.N) said on Friday it will reinstate its dividend and buy back up to 5 percent of its stock, a day after the collapse of a C$34.8 billion ($28 billion) deal to take the Canadian telecoms giant private.
BCE, the country’s biggest telecommunications company, said it will pay a quarterly dividend of 36.5 Canadian cents a share on Jan. 15 to shareholders of record as of Dec. 23.
The company had suspended dividend payments late June to conserve cash while working to finalize the buyout deal, which formally failed on Thursday.
The size of the reinstated dividend and share buyback plan reflects the telecom company’s cautious view of the economy, CEO George Cope told Reuters in an interview.
BCE shares fell on Friday, with investors expecting the company to declare a more hefty payout and repurchase plan.
“I think there was an expectation that we may have done more, and I think what we’ve tried to reflect is the capital market environment in the next 24 months,” Cope said.
“We think it’s prudent to return money to our shareholders, but also maintain maximum liquidity with the environment we’re heading into.”
Cope said BCE offers services that are in demand regardless of whether the economy is strong or weak. Even so, it’s unrealistic to think the current downturn will not have any impact on its fortunes, he added.
“We’re going to see an impact on the commercial side of the marketplace,” he said, characterizing the likely harm as limited.
Montreal-based BCE had about C$2.6 billion in cash and cash equivalents as of the end of September. Cope said the company has about C$1.5 billion in bonds maturing in 2009 and more in 2010.
Investors and analysts expected BCE to reinstate its dividend and buy back a chunk of stock as part of any “Plan B” it decided to pursue if the buyout collapsed.
BCE did just that on Friday, bringing back its dividends at the same annualized level of C$1.46 a share that it paid before suspending them in late June. It also said it would buy back up to 5 percent of its stock, or about 40 million shares.
Such moves normally are cheered by investors, but BCE’s shares sank 57 Canadian cents to C$21.46 on the Toronto Stock Exchange, signaling investors had expected more.
Analysts had speculated BCE could offer a special dividend as well, or perhaps a buyback that was bigger in size that what was announced.
While the collapse of the leveraged buyout — the world’s largest — was “tough,” Cope also said he hopes that the Ontario Teachers’ Pension Plan, which led the buyer group, will remain a large shareholder and “committed” to the company.
Teachers owns 6.3 percent of the company’s stock.
Asked whether Cope is concerned that Teachers may seek to remove the company’s board of directors, Cope declined to comment. Teachers also wouldn’t comment on the question.
Cope also declined comment when asked whether rival Telus Corp (T.TO) had expressed any interest in a combination. The two had talked about combining before the Teachers-led private-equity consortium emerged as the winning bidder.
Cope said he had been disappointed by news on Nov. 26 that KPMG, BCE’s accountants, had ruled that a post-buyout BCE would fail a solvency test because of its huge debt load. The formal death of the deal came on Thursday.
“Our employees, as all of our shareholders, had full expectation that we were on track to close the transaction,” he said.
In July, Bell Canada instituted a 100-day plan to enhance its customer-service capability, competitiveness and cost efficiency.
The company said the initiatives, including reducing the number of management positions at its core Bell Canada unit by 15 percent, new service programs, major investments in its wireless and fiber networks, as well as its service infrastructure, would result in savings of about C$400 million.
However, there is an upside that the company loses by staying a publicly-listed entity, Cope conceded.
“Did we lose one of the advantages of being private, in that we now have to tell our competitors how we do every quarter? Yeah, absolutely we did.”
(Additional reporting by John McCrank)
Reporting by Wojtek Dabrowski; Editing by Frank McGurty