Bloomberg News

BCE-Astral Bid Approved With Conditions by Canada Regulator (2)

June 27, 2013

Canada’s media regulator accepted BCE Inc.’s C$3 billion ($2.9 billion) bid to acquire Quebec broadcaster Astral Media Inc. (ACM/A) as long as BCE agrees to conditions including investing C$247 million in programming and not withholding content from competitors.

BCE, the nation’s biggest telephone company and private broadcaster, must also provide reasonable access to advertising on its radio stations, the Canadian Radio-television and Telecommunications Commission said in a decision released today in Gatineau, Quebec, near Ottawa. The CRTC won’t require BCE to divest any Astral assets that the company hadn’t already offered to sell.

“Canadians can be assured that the necessary steps are being taken to foster a healthy and competitive broadcasting system,” the regulator said.

The CRTC initially rejected the C$50-a-share bid by Montreal-based BCE on Oct. 18, saying it would curb television and radio competition. BCE later revised its offer for Astral, agreeing to sell assets to allay concerns the deal would hamper competition.

The purchase of Astral would allow BCE to add French-speaking television channels like Super Ecran, providing content for its wireless devices amid competition for cable and wireless subscribers from Quebecor Inc. (QBR/B) and U.S. video-streaming services such as Netflix Inc. (NFLX:US)

Fresh Conditions

By imposing fresh conditions rather than rejecting the deal for a second time, the Canadian regulator is betting it can satisfy concerns about BCE wielding too much broadcasting power, said Neeraj Monga, an analyst at Veritas Investment Research in Toronto who rates BCE a sell.

“An early view of the decision would be that CRTC believes its regulatory framework can keep BCE’s power in check,” Monga said in a telephone interview.

BCE is assessing the details of the decision and will issue a detailed statement before the start of trading tomorrow, said Jason Laszlo, a spokesman for the Montreal-based company. Astral has no comment on the CRTC decision at this point, said Olivier Racette, a spokesman.

The Astral deal would be BCE Chief Executive Officer George Cope’s largest. The company has been adding media content to lure customers to spend more on wireless data. It teamed with Toronto-based Rogers Communications Inc. (RCI/B) to buy a controlling stake in Maple Leaf Sports & Entertainment Ltd. for $1.3 billion in 2011, becoming owners of the Toronto Maple Leafs, the most valuable franchise in the National Hockey League.

Competition Concerns

BCE agreed to buy broadcaster CTV in 2010 for C$1.3 billion in cash and C$1.7 billion in debt, giving it 30 specialty channels, including sports channel TSN.

In its October rejection, the CRTC said the deal raised concerns about competition, ownership concentration in television and radio, vertical integration and the exercise of market power. The regulator calculated it would give BCE a 42.7 percent share of the Canadian English-language television market and 33.1 percent of the French-language market.

“Our decision last fall sent a clear signal that the public interest is paramount,” CRTC Chairman Jean-Pierre Blais said in a speech June 12.

BCE revised its offer, agreeing to sell Astral’s share of six television joint ventures, including Teletoon and Cartoon Network, as well as two radio stations, to Corus Entertainment Inc. (CJR/B) for C$494 million. Canada’s antitrust agency approved the revised deal in March.

No Divesting

During public hearings last month, Cope said BCE wouldn’t divest more assets to win support of the deal. Asked by Blais last month if the company would agree to divest specialty channels such as TMN, TMN Encore, HBO Canada and Super Ecran as a condition of CRTC approval, Cope replied, “If we were to be asked to divest any more of the channels or content, we would not move forward with the transaction.”

The regulator said today the revised deal would give BCE 35.8 percent of the English-language TV market and 22.6 percent of the French-language market.

BCE said May 9 it was targeting an early summer closing of the Astral deal, pending CRTC approval.

Under the CRTC conditions, BCE can’t “unduly” withhold content distributed online, such as through mobile phones. The regulator said it will monitor distribution deals that BCE signs with competitors and arbitrate disputes. BCE must invest C$247 million over seven years in programming, C$72 million more than it had proposed, the CRTC said.

“None of these conditions seem too onerous to me,” Veritas Investment’s Monga said of the fresh conditions the CRTC cited today.

To contact the reporters on this story: Andrew Mayeda in Ottawa at amayeda@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net


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