February 11, 2009 / 1:42 PM / 9 years ago

UPDATE 4-BCE ups dividend, sees profit gain in 2009

* Posts quarterly loss of 6 Canadian cents a share

* Annual dividend increased by 5 percent

* Forecasts 2009 adjusted EPS growth of more than 5 pct (Updates stock, adds comments from presentation to analysts)

By Susan Taylor and Wojtek Dabrowski

OTTAWA/TORONTO, Feb 11 (Reuters) - BCE Inc BCE.TO BCE.N, Canada’s biggest telecom company, reported a fourth-quarter loss on Wednesday on big investment writedowns and restructuring charges, but it said it expects earnings to increase more than 5 percent in 2009.

Shares of the company rose after it forecast adjusted earnings per share growth of more than 5 percent this year and “stable” revenue at its core Bell Canada telecom unit. It also said it would increase its annual dividend by 5 percent to C$1.54 per share, or 38.5 Canadian cents on a quarterly basis.

Analysts welcomed the dividend boost and bullish profit outlook, saying that cost controls will help offset the revenue weakness that Canada’s deepening recession could bring.

Since June, BCE has cut at least 3,200 staff to a current work force of less than 41,000. It has also reduced spending on real estate and consulting, while chopping the number of ad agencies it uses to 11 from 47, executives told analysts at a Toronto presentation.

The results are the first set of financials the Montreal-based company has released since a C$34.8 billion ($27.8 billion) bid to take it private collapsed in December.

“The fact that the company is increasing its dividend by 5 percent is a very strong vote of confidence in its outlook for the future,” said Gavin Graham, director of investments at BMO Asset Management. “That’s a very encouraging sign.”

BCE stock rose 67 Canadian cents, or nearly 2.7 percent, to C$25.80 on the Toronto Stock Exchange on Wednesday, and rose 51 cents to $20.61 in New York.

The erstwhile buyout deal, led by the Ontario Teachers’ Pension Plan, crumbled after BCE’s accountants determined that the company that would emerge after the transaction would fail a solvency test because of its huge debt load.

BCE has since sued Teachers and the other private equity firms involved in the proposed buyout over the transaction’s C$1.2 billion break-up fee.

Left without a buyer, BCE said in December it would buy back up to 5 percent of its stock and bring back the dividend it suspended in late June as it worked to seal the buyout.

BCE said on Wednesday that it ended the year with more than C$3 billion in cash and was well-positioned to finance its business plan and meet pension funding and maturing debt requirements over the next two years without having to access capital markets.

Total pension funding will soar to about C$500 million this year from C$209 million in 2008, BCE said, reflecting market turmoil and related losses.

BIG CHARGES

BCE said it lost C$48 million ($38.4 million), or 6 Canadian cents a share, in the quarter, compared with a year-earlier profit of C$2.35 million, or C$2.93 a share.

The results include investment losses of C$372 million and restructuring charges of C$117 million. Excluding those, profit fell to 55 Canadian cents a share from 72 Canadian cents.

Revenue dipped to C$4.49 billion from C$4.52 billion.

Analysts had expected the company to earn 51 Canadian cents a share before one-time items on revenue of C$4.53 billion, according to Reuters Estimates.

“Revenue was well below our estimate,” wrote National Bank Financial analyst Greg MacDonald, who expected C$4.59 billion. “The revenue miss appears to be entirely from wireless, which grew revenues just 2.3 percent versus our 9 percent estimate.”

The wireless performance was “certainly by no means exceptional,” Chief Financial Officer Siim Vanaselja told analysts and reporters during a presentation in Toronto.

The wireless unit reported revenue of C$1.13 billion as a 5.4 percent increase in wireless service revenue was partly offset by a 17.9 percent drop in product sales.

The company added 470,000 wireless customers in the quarter and operating income rose 3.9 percent to C$294 million.

“We need to grow the number of locations that sell Bell Mobility products,” Chief Executive George Cope told analysts.

Vanaselja said BCE plans to finish a network upgrade with fellow Canadian wireless company Telus by early 2010.

The company’s wireline business had a 0.7 percent drop in revenue to C$2.73 billion and operating income fell 17.5 percent to C$226 million.

MacDonald said the 2009 earnings forecast translates into to adjusted profit of about C$2.36 a share, above the consensus analyst estimate of C$2.15 a share.

He said Bell Canada capital spending estimates are C$200 million to C$400 million lower than he expected.

$1=$1.25 Canadian Additional reporting by Wojtek Dabrowski in Toronto; Editing by Peter Galloway

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