BCE Inc. said Tuesday it has dropped its plan to convert to an income trust, following the lead of its main competitor, Telus Corp.

The widely-expected move by BCE comes five weeks after Finance Minister Jim Flaherty, citing the potential loss of tax revenue, stopped the conversion trend by announcing a new tax on trusts.

Telus Corp. announced on Nov. 24 that it had scrapped its plan to convert to a trust.

BCE said it is continuing with its plan to eliminate its holding company operations. The company intends to change its name to Bell Canada Inc. and will have two operating divisions, Bell and Bell Aliant Regional Communications.

"It's not about BCE anymore, it's about Bell, because the value creation model of the business has changed," CEO Michael Sabia told reporters. "It's not about the way BCE used to seek to create value, it's about creating value in the core of our business based on the core of our capabilities."

The conglomerate also told investors that it will boost its annual dividend by 11 per cent to $1.46 per share.

On Oct. 31, Flaherty gave existing trusts a four-year grace period before the new tax would apply. But Telus and Bell Canada did not qualify, since they had not started trading as trusts by the time Flaherty announced the policy change.

Financial growth expected

In addition to dropping the conversion and following through with plans to eliminate its holding company structure, BCE forecast financial growth for 2007.

The company said it expects revenue growth for the year will come in between three and five per cent higher than in 2006. Earnings-per-share are also forecast to grow by between four and seven per cent, excluding factors such as investment gains or restructuring charges.

Sabia said he wouldn't call the outlook optimistic.

"A plan is a plan and we have to execute against that plan," Sabia said. "But what we do believe — given the platform that we built and the capabilities that we have and the capabilities that we are continuing to develop — that the company is in a materially better position than it was three or four years ago," he said.

In the wake of the news, BCE shares gained $1.45, or just over five per cent, to finish at $30.33 on the TSX.