BCE Inc. plans to buy back up to 5% of its common shares following the collapse of the proposed $35 billion leveraged buyout led by Ontario Teachers’ Pension Fund, the company announced Friday.

The company has also reinstated its common share dividend program.

The dividend program had been suspended for the past two quarters.

For shareholders of record as of Dec. 23, a quarterly dividend of 36.5¢ a share will be paid on Jan. 15, 2009.

BCE is the most widely held stock in Canada, according to CDS Clearing and Depository Services Inc.

BCE also said it will return capital to shareholders by repurchasing up to 40 million outstanding common shares.

“A share buyback is the most efficient method of distributing capital to our shareholders, particularly given the current valuation metrics of the company,” Siim Vanaselja, chief financial officer of BCE, said in a release.

Operating subsidiary Bell Canada will also continue its move forward as a re-energized company with a clear goal — to be recognized by customers as Canada’s leading communications company, the company said.

“Our enhanced operational performance in recent months confirms that Bell is competing as a cost-effective and customer-focused communications company. The Bell team has implemented a range of programs to deliver a better customer experience, and we are eager to build on the clear progress we’ve already made,” said George Cope, president and CEO of Bell and BCE.

“Given this steadily improving business trajectory, we view the dividend and share buyback initiatives announced by BCE today as very attractive to our shareholders now and going forward,” Cope said.

IE