Bell Canada to cut 2,500 jobs

Bell Canada said Monday that it will cut 2,500 jobs, or 6 percent of its work force, as Canada's largest communications company streamlines management to lower operating costs just ahead of its impending $35 billion takeover by a private equity group.

The changes include a 30 percent reduction in executive jobs revealed earlier this month and about 15 percent of management. The cuts will help save about 300 million Canadian dollars ($294 million) in annual costs, said George Cope, president and new CEO of Bell Canada and parent BCE Inc.

After months of planning, the company is cutting the hierarchy from 11 layers to a maximum of eight.

"This is beyond money," Cope said. "This is about making sure our decisions are made quicker, our pace picks up in the competitive marketplace we're in and that all management is closer to the customer than we were just yesterday in terms of this new structure."

Non-management front-line service positions are not affected, the company said.

The size of the cuts was slightly larger than the 2,000 expected, but the move was supported by analysts and industry observers.

"It's always unfortunate to have job cuts, but from a business point of view and a margins and efficiency point of view, I think Bell needed to do that and that's what private equity does," said analyst Troy Crandall of the MacDougall, MacDougall & MacTier brokerage.

Crandall said he expects another 500 to 1,000 jobs will be cut over time as the company makes strategic changes involving its work force, which numbers about 40,000. Parent company BCE employed more than 54,000 people at the end of last year.

But Carmi Levy, an industry analyst at AR Communications, sees thousands more facing pink slips, including some front-line workers. He said Bell has a more bloated employment hierarchy than traditional rivals such as Telus and Rogers Communications. It also faces new wireless competitors who will survive on relatively skeletal teams, he said.

Levy expects Bell to eventually trim its work force by at least 2,500 more employees.

Changes were expected to come as the telecom company's new CEO took over from outgoing CEO Michael Sabia earlier this month. Levy said Cope's move is part of his 100-day restructuring plan that also comprises of selling underperforming assets.

"He needed to come in with a bang and that's exactly what he's doing here," Levy said. "He's starting with, what in previous generations was perceived as the most sacrosanct of all Bell positions, the middle manager."

Michel Ouimet of the Canadian Union of Public Employees, which represents half of Bell's employees, said it has long held that the company is top heavy with managers.

"We are happy that our people won't be touched for the moment, and we hope that it won't happen," he said, noting that negotiations with some workers will begin this fall.

Bell is being taken private by an investment group led by the Ontario Teachers Pension Plan Board and several U.S. partners. The deal is the biggest takeover in Canadian history and is expected to close in December.

The banks financing the takeover have committed to provide billions in financing to complete the deal, reasuring those worried the deal might fall through as credit conditions tightened in the wake of the subprime mortgage sector's meltdown.

Including assumed debt, the transaction is worth $51 billion, making it the largest leveraged buyout ever.

The acquisition price is 42.75 Canadian dollars ($41.80) per share. The company won't pay any further quarterly dividends to common shareholders before the transaction closes.

The dividend suspension will save BCE up to 900 million Canadian dollars ($881 million) to help pay off debt or put toward working capital, and the delay in closing the transaction will give the banks more time to market and syndicate out part of their loans.

The only remaining concern rests on a further deterioration of credit markets that prompts the banks to unexpectedly walk away from the deal.

BCE had annual revenue of 17.8 billion Candaian dollars ($17.5 billion) in 2007. It had 5.8 million wireless subscribers, 8.64 million phone lines, 1.94 million Internet subscribers and 1.82 million satellite television subscribers in 2006.