GATINEAU, Quebec (Reuters) - Canada’s broadcast regulator blocked BCE Inc’s controversial C$3 billion ($3.05 billion) takeover of Astral Media on Thursday, declaring the deal would have given too much power to BCE, already the country’s biggest telecoms company and owner of numerous TV and radio assets.
“BCE failed to persuade us that the deal would benefit Canadians,” said Jean-Pierre Blais, who took over as chairman of the Canadian Radio-Television and Telecommunications Commission (CRTC) four months ago.
It was the biggest deal the CRTC had ever blocked, and a leading telecoms analyst said it marked a shift toward standing up for the consumer.
“In four months, Blais has transformed the CRTC into a pro-consumer advocate, creating the kind of regulatory agency that until recently was scarcely imaginable. The change is long overdue,” said Michael Geist at the University of Ottawa.
The decision is good news for media company Quebecor Inc, which feared a BCE takeover of Quebec-based Astral - which owns specialty-TV channels, radio stations and produces programming - would challenge its dominance of French-language content.
The ruling also benefits BCE’s English-language competitors, including Rogers Communications Inc, which said BCE was already abusing its market power as an integrated broadcaster and distributor. Rogers said it was a “courageous” decision.
“The CRTC found steel in its spine,” said Iain Grant, who is managing director of telecom consultancy Seaboard Group. “I just think this whole thing was unpalatable.”
The decision can be appealed to the Federal Court of Appeal but cannot be overturned by the federal cabinet, the CRTC said.
“It would have placed significant market power in the hands of one of the country’s largest media companies,” Blais said.
The opposition New Democratic Party and the separatist Bloc Quebecois both welcomed Blais’ decision.
The rejection is set to cause a sell-off in Astral shares on Friday. The company’s Class A shares closed 3 percent lower at C$47 on Thursday, as some investors sold out ahead of the ruling on fears the CRTC would veto the deal. BCE had offered Astral shareholders C$50 per share, a nearly 40 percent premium to the stock’s close a day before the deal was announced.
UBS analyst Phillip Huang warned that the ruling may also hurt BCE’s stock, which has risen about 9 percent since the deal was announced on March 16.
“We believe the failure of this deal may lead some to question the potential impact on BCE’s future dividend increases and flexibility to fund increasing capital expenditure to accelerate growth,” said Huang, in a note to clients.
Quebecor, Rogers and other competitors said the deal would have allowed BCE to lock up more programming for its vast media platform and would have given the company too much heft and pricing power in the market.
They launched a strong campaign against the deal, running TV commercials and full-page newspaper advertisements, as well as holding press conferences that outlined their concerns.
They were worried that the deal would have allowed BCE to force them to pay exorbitant prices for content, and warned that this would lead to higher prices for consumers.
The CRTC said that in English-language television, the combined BCE-Astral would have controlled an unprecedented amount of revenue and viewing options.
The regulator has a policy of quickly approving transactions that keep a company’s control under 35 percent of total television audience share, and carefully examining transactions which yield a 35-45 percent share.
The CRTC concluded that on the French-language side the takeover would have given BCE 33.1 percent of viewership of Canadian television services, but 42.7 percent on the English-language side.
BCE had argued that the viewing of U.S. and other non-Canadian services should be included in the calculation, and that when that is done, its share would have been only 24.4 percent in French and 33.5 percent in English - under the cautionary level of 35 percent. The CRTC rejected that formula.
BCE had also argued that it would be an important counterweight to Quebecor’s influence in French-language broadcasting, but the CRTC said this would merely have led to the vast majority of French programming being held by two large, vertically integrated companies.
“We’re so pleased that the CRTC listened to the thousands of Canadians who have spoken out against this deal,” said Lindsey Pinto, a spokeswoman for OpenMedia.ca, a Vancouver-based citizens’ group that campaigned against the deal.
“Canada’s media system is already one of the most concentrated in the industrialized world,” she said. “Canadians are paying higher prices for (less) content and services, and that’s largely because we have four large companies controlling 86 percent of cable and satellite distribution.”
Additional reporting by Euan Rocha and Cameron French in Toronto; Editing by Bernard Orr, Peter Galloway, Tim Dobbyn and M.D. Golan