UPDATE 2-Manitoba Telecom to cut jobs in Allstream unit, slash dividend

Thu May 7, 2015 4:32pm EDT
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(New throughout, adds CEO comments on Allstream options, takeover speculation, updates share price)

TORONTO May 7 (Reuters) - Canadian telecom company Manitoba Telecom Services Inc said on Thursday it would cut a quarter of its headcount within its Allstream division, reduce capital expenditures and slash its annual dividend following a strategic review.

Shares jumped nearly 7 percent to C$27.38 in Toronto.

A spiraling defined-benefit pension bill has stung the Winnipeg-based company, which faces tough competition in the sparsely populated Canadian province where it sells MTS-branded telephone and Internet services and nationally where its Allstream fiber optic network connects mostly mid-market companies.

The company said it would cut its annual dividend to C$1.30 per share from C$1.70 a share.

MTS also said it planned to reduce capital expenditure in its Allstream business by 20 to 30 percent.

The review confirmed that Allstream is not core to the company, and by cutting costs and narrowing its focus on key customers, MTS can prepare it for a sale, spinoff, or strategic partnership, said Chief Executive Jay Forbes, who took over this year from retiring CEO Pierre Blouin.

Forbes said in an interview that he has received plenty of unsolicited interest in Allstream during his four months on the job, but would not offer a time frame for MTS' exit.

"The minute you announce something for sale, you're backing yourself into a corner, and taking away some of your option value."   Continued...