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Regulators reject Bell/Astral deal

Bell Canada Enterprises (BCE) will not be allowed to purchase Astral Media, following a surprise regulatory ruling that has stopped cold the country’s biggest-ever media merger.

George Cope

George Cope

The Canadian Radio-television & Telecommunications Commission (CRTC) has rejected the proposed C$3.3bn ($US3.3bn) deal – siding with critics who argued it would upset the balance of power in the Canuck TV industry.

The deal is “not in the public interest,” said the regulator and “would have placed significant market power in the hands of one of the country’s largest media companies.”

“We could not have ensured a robust Canadian broadcasting system without imposing extensive and intrusive safeguards, which would have been to the detriment of the entire industry,” added CRTC chairman Jean-Pierre Blais.

Market share was a point of bitter dispute amid last month’s CRTC hearings on the deal, with critics insisting BCE and Astral combined would have a market share of between 45% and 49% in English Canada, above the CRTC’s limit of 35%.

BCE insisted its share would be no more than 33.5%, but in its ruling the CRTC put the figure at 42.7% for English Canada and 33.1% for French Canada.

The ruling denies BCE – which owns the CTV and CTV2 networks plus some 30 cable channels through its Bell Media unit – its long-sought entry into both French-speaking Quebec and Canada’s pay-TV market. Astral’s holdings include The Movie Channel, HBO Canada, the French-language Canal D and half of Teletoon.

BCE said it will take its case to the federal government. “This is a decision that should not stand,” said president and CEO George Cope. “We met all the CRTC’s rules.”

The ruling looks to kill BCE’s deal-sweetening pledge to launch a Canadian service to compete with Netflix and Bell Media’s recent co-venture with Cirque du Soleil.

It also spares broadcasters and cable companies in Quebec – which teamed up to run an aggressive ad campaign against the deal – from facing a new and very powerful competitor.

Competitor Rogers Media cheered the CRTC ruling as “courageous.” The Toronto-based conglomerate opposed the deal but was not part of the Quebec-based coalition.

The ruling came as a shock to industry-watchers, who had largely expected the CRTC to okay the deal with a number of conditions, as has been its habit during Canada’s recent string of mega-mergers.

The purchase would have created a new and very large programming fund, perhaps over C$300m, which producers must now do without, at least in the short term. Astral is expected to court other buyers, which will lead to a new approval process and, eventually, a new programming fund.

In the meantime, producers face short-term “uncertainty” as Astral adjusts to the failed deal, said Michael Hennessey, head of the Canadian Media Production Association. Astral “is a large commissioner of kids and movie programming,” he told C21, “and the uncertainty this ruling creates will be reflected in what they invest in.”

“In the longer run, we can assume somebody, some big player, will make a play for those assets. They’re too attractive,” Hennessey added.

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