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CRTC rejects Bell's $3.48 billion buy of Astral Media, worries about competition

OTTAWA -- The federal broadcast regulator gave an unequivocal thumbs down to BCE Inc.'s takeover of Astral Media on Thursday, declaring in no uncertain terms the $3.4-billion deal was not good for Canadians.

The surprise announcement by the CRTC was announced after stock markets closed and marked the first major decision for newly installed commissioner Jean-Pierre Blais.

Not only did Blais, who took over in late June, turn down one of the biggest takeovers ever submitted to the Canadian Radio-television and Telecommunications Commission, he left little doubt about where he stood, or how he would respond should BCE return with a modified but essentially similar proposal.

"BCE failed to persuade us that the deal would benefit Canadians," he said. "It 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."

Telecom analyst Iain Grant said the CRTC hasn't delivered a ruling of this magnitude since 1992 when it approved competition for long-distance calling.

"This is a defining moment for the CRTC," said Grant, managing director of the SeaBoard Group.

"They have stared at Canada's largest corporation and one of the largest deals in Canada and said 'No.'"

The CRTC said BCE -- owner of Bell Canada, the CTV television network, numerous specialty stations and the former Chum radio stations -- already has 33.7 per cent of the English television viewing audience, well ahead of its nearest rival Shaw Communications with 21.9 per cent.

Had it succeeded in acquiring Astral Media's 25 channels, including The Movie Network, HBO Canada and French-language Super Ecran, Family Channel and Disney Junior and more than 80 radio stations into the BCE fold, it would have gained 42.7 per cent of the English viewing audience. The combination would also have given it 33.1 per cent of the French TV market.

"That convergence, integration and scale may lead to a point at which the size of an entity on a national level becomes so large that it hinders effective and healthy competition," the regulator said.

In public hearings last month, BCE officials said the acquisition still left sufficient "diversity of voices" in the broadcasting system, and pledged tangible benefits by adding $200 million in funding for programs.

Bell said it needed to get bigger to take on foreign online competitors like Netflix and that if the deal is killed that Astral's assets will ultimately be split up, guaranteeing continued foreign dominance in the way that online content is delivered.

Most of Bell's rivals, with the exception of Shaw, opposed the deal at the CRTC hearing, some presenting doomsday scenarios of uncompetitive behaviour.

The CRTC said there were some benefits to the system in Bell's proposal, but they were not "significant and unequivocal" enough to outweigh the concerns.

Had the regulator approved the deal, it would not have been clear sailing for Bell.

The Competition Bureau had indicated it was "increasingly concerned" about the deal.

Astral shares were expected to come under pressure in trading Friday.

Under the proposed deal, Bell was set to pay $50 per share for Astral's class A non-voting shares and $54.83 for the company's class B subordinate voting shares.

Astral's class A shares closed down $1.44 at $47 on the Toronto Stock Exchange before the CRTC's decision was announced. The class B shares were up a penny at $51.90.

BCE shares were up 15 cents at $43.63.

Julian Beltrame reports for the Canadian Press.

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