logo-loader

Manitoba Telecom Services shares off as pension funding obligations to increase

Last updated: 12:30 31 Jan 2014 EST, First published: 13:30 31 Jan 2014 EST

canadian_dollar350_52ebec2ab8340

Shares of Manitoba Telecom Services (TSE: MBT) declined on Friday after the telecommunications company announced that Canada's Supreme Court has reinstated a lower court ruling on a pensions lawsuit, and said it is disappointed with the outcome that is expected to boost pension benefits. 

The lawsuit was in regards to the administration of one of MTS' pension plans following the company's privatization in 1997. 

 The company, the largest full-service telecommunications provider for residential and business customers in Manitoba, said that it is reviewing the implications of yesterday's ruling, which it says is "complex and requires further negotiations and discussions" before the impacts on the pension plan and MTS are known "with certainty".

It said pension benefits are expected to be increased by $43 million, plus interest calculated at the rate of the pension plan's return since 1997, which could increase pension benefits by up to $147 million in time. MTS will disclose the specific implementation plan once it has more details, according to its statement.

 "This is a very disappointing outcome, but we were prepared for this scenario and are confident that should we need to make additional pension payments this year, we can fully manage its financial impact while maintaining our long-term strategy for delivering shareholder value," said CFO of MTS Allstream, Wayne Demkey.

Last month, the company closed an equity financing of $249 million. It said it expects to have sufficient liquidity to satisfy all its pension funding obligations, and anticipates it will maintain its current credit rating and "strong free cash flows". 

"We continue to feel that the company has complied with all applicable pension law, as well as the provincial legislation that privatized MTS," said chief corporate and strategy officer for the company, Paul Beauregard, in a statement released late Thursday. 

"At the time of privatization, the company viewed its obligation was to implement a pension plan that provided pension benefits equivalent to what existed prior to privatization. We fulfilled that obligation. Benefits today are absolutely identical to what they were at privatization, a fact that everyone has agreed to."

Beauregard explained that prior to privatization, pension funding was shared with employees on an equal 50/50 basis, and since being taken private more than 15 years ago, it has made commitments of roughly $765 million to this pension plan, of which $557 million has already been paid in cash. Employee contributions over the same period totaled $163 million, according to the release. 

"The bottom line is that plan members have continued to receive a very attractive pension benefit that is in every way equivalent to or, in the company's view, better than they would have received under the old plan," he said. 

The company will make further comments with regards to the Supreme Court's decision in its upcoming release of its annual financial statement and associated analyst conference call, expected to be held on the afternoon of February 6. 

MTS Allstream, with approximately 5,000 employees across Canada in its two operating divisions, has nearly 2 million customer connections spanning business customeres across the country, and residential customers in the province of Manitoba. Its fibre optic network spans more than 30,000 km across Canada. 

The company's stock was down more than 3.6% in early afternoon trade on Friday, at C$29.71, paring year-to-date gains to 0.2%. 

Poseidon Nickel signs binding agreement with Mineral Resources to divest...

Departing Poseidon Nickel Ltd (ASX:POS, OTC:PSDNF) CEO Craig Jones and incoming CEO Brendan Shalders join Proactive’s Jonathan Jackson to discuss the divestment of Lake Johnston to Mineral Resources Ltd (ASX:MIN). Jones, who has played a pivotal role in this strategic move, shared insights on...

5 hours, 22 minutes ago