BCE ‘didn’t get the memo’ on CRTC’S shift
Broadcast and telecom regulator’s new focus is on consumer interests
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Greenberg says it’s business as usual at his familycontrolled company Astral Media.
In releasing quarterly financial results on Wednesday, Greenberg said he wouldn’t comment directly on the failed bid to buy his company by BCE Inc.
But you have to wonder what’s ahead, not just for the Montreal-based firm but for the telecom and broadcast sector as a whole, following the stunning rejection by regulators of BCE’s $3.4-billion takeover of Astral.
It was a decision nobody saw coming.
The CRTC denied the deal because it said if Bell had bought Astral’s group of 20pay and specialty TV channels, it would have had too big a share of the Canadian TV market.
We don’t often see transactions of this size shot down in Canada.
The usual route for regulators concerned with excessive concentration is to allow a takeover to proceed, but with conditions such as requiring the buyer to divest of some assets to get below the acceptable threshold.
The CRTC, with its new focus on consumer interests, appears not to have considered that route.
Iain Grant, an analyst at SeaBoard Group, says Bell so misread the CRTC’s new orientation that the commission was in no mood to be generous.
Bell, more used to dealing with the CRTC as a telecom regulator rather than as a broadcast regulator, was not prepared for the cultural shift at the CRTC.
It failed to convey why the deal would be good for consumers and did not come up with enough of a benefits package to sway the issue.
Right from the start it was on the defensive in Quebec, where competitors like Quebecor and Cogeco successfully seized on the issue of market dominance. Consumer groups were quick to pile on.
This week, CRTC chairman Jean-Pierre Blais publicly emphasized the new consumer focus “but I don’t think Bell got that memo,” Grant says.
The commission noted in its decision that the transaction would have removed the last major independent non-integrated broadcaster from the system.
The acquisition would have combined the first and third largest players in discretionary TV services.
In the French-language sector, Bell would have controlled more than 63 per cent of revenues. The combination would have represented more than five times the revenue generated by the next largest competitor, Quebecor.
Given all that, what’s next for both Bell and Astral?
Federal Industry Minister Christian Paradis appeared to deliver a final blow to the proposed transaction, saying that Ottawa doesn’t have any intention to intervene.
But Bell continues to petition the federal cabinet to review the CRTC’s policy direction so that the company can resubmit a bid. Extensions on the deal could last into January, precluding Astral from talking to any other suitors.
Industry observers suggest that Bell will not go down without a fight. Acquisition of Astral’s assets in Quebec is just too crucial a piece in its business plan to walk away.
And the BCE board won’t be happy if the CRTC’s action opens the door to competitors like Telus or Rogers to buy the TV assets it prizes.
The CRTC in the past has been solutions-oriented, notes one industry observer. It usually tries to guide parties down the path they need to take to get approval.
So it would be a real sur- prise if Bell (or other potential buyers) did not at least seek some further guidance from the commission on what kind of transaction would be acceptable to regulators.
And the CRTC remains open to re-evaluating the deal. “We’re an administrative tribunal,” Blais told the Ottawa Citizen Monday. “We can’t refuse to hear things that are brought to us.”
Meanwhile, it’s clear that Astral remains in play. While there was some speculation that Greenberg wasn’t keen on selling his company, matters have gone too far now.
The most likely scenario is a piece-by-piece sale, with Astral’s 84 radio stations and its outdoor advertising business auctioned separately from discretionary TV.
We haven’t heard the last of this story. TV assets of this nature don’t come up for sale very often.
This remains a historic opportunity for someone to reshape the Canadian media landscape.