Aug. 6 (Bloomberg) -- BCE Inc., Canada’s largest phone company, raised its annual sales and profit forecasts after cutting jobs and expanding its retail business. The company also boosted its annual dividend.

Sales in 2009 will increase 1 percent to 2 percent, Montreal-based BCE said today in a statement. In February, the company said sales would be “stable.” Profit, excluding some costs, will be as much as C$2.50 a share. Analysts had predicted C$2.38, according to a Bloomberg survey.

BCE is putting the savings from job cuts into its wireless business to lure customers that have put off upgrading to new phones. In May, the company agreed to buy the 50 percent of Virgin Mobile Canada it didn’t already own. BCE purchased the 750-store electronics retail chain The Source in July.

The better outlook reflects “strong operating performance and acquisitions of The Source and Virgin Mobile Canada,” Simon Flannery, an analyst at Morgan Stanley in New York, wrote today in a note. He rates the stock “overweight.”

Second-quarter net income fell 4.2 percent to C$346 million ($322 million), or 45 cents a share, BCE said. Profit, excluding some costs, was 58 cents a share, in line with the average estimate of analysts in a Bloomberg survey. Sales dropped 2.1 percent to C$4.3 billion.

BCE gained 14 cents to C$24.81 at 4:10 p.m. in Toronto Stock Exchange trading. The stock has lost 1.3 percent this year.

BCE lifted its annual dividend by 5 percent to C$1.62 a share, the second increase of the year.

Wireless Subscribers

Rogers, Canada’s largest wireless carrier, last week cut its estimate for full-year sales growth to between 2 percent and 4 percent. The company added 148,000 subscribers, more than analysts expected, helped by demand for Apple Inc.’s iPhone. Rogers is the exclusive carrier for the device in Canada.

BCE added 45,000 wireless subscribers in the quarter. Jonathan Allen, an analyst at RBC Dominion Securities Inc. in Toronto, had estimated 89,000. Greg MacDonald at National Bank Financial predicted 76,100.

Average monthly revenue per user, a measure of how much mobile-phone customers spend on calls and data, fell C$2.22 to C$52.05, contributing to a 1.4 percent decline in wireless revenue, BCE said. That beat MacDonald’s estimate of C$51.09.

Customer Bills

The outlook for the size of customers bills “is not going to get easier,” Chief Executive Officer George Cope said on a conference call with reporters. “It’s trickier going forward and we have to manage to that.”

The company also said it struck an agreement with AT&T Inc. that will allow the U.S. carrier’s customers to use Bell’s new third-generation network when in Canada. Bell customers will have access to AT&T’s high-speed network in the U.S.

Landline losses narrowed for a seventh quarter to 100,000, compared with 125,000 a year earlier. Revenue in the unit dropped 2 percent because of “more cautious’ corporate spending, BCE said.

BCE cut its workforce by 5.7 percent to 50,102 in 2008. The company said it expected the reduction to yield annual savings of C$300 million.

Telus Corp., Canada’s second-largest phone company, is scheduled to report second-quarter results tomorrow.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

Last Updated: August 6, 2009 16:19 EDT