BCE Inc. will go before the federal broadcast regulator in February to ask for approval of its deal to acquire control of the broadcasting arm of CTVglobemedia Inc. At the same time, the company will argue that ownership is not changing much at all - or at least, not enough to cost BCE a sizable wad of cash.
The telecommunications giant is asking that its requirement to pay "tangible benefits" - the money a company has to contribute toward improving the Canadian broadcast system whenever a television licence changes hands - be reduced from potentially more than $300-million to zero.
BCE's reasoning is that it already paid into the system, to the tune of $230-million, when it bought CTV the first time around, back in 2000.
While BCE sold off much of its interest in the company in 2006, keeping a 20-per-cent stake (which shrank further to 15 per cent), the company is arguing that it never stepped away from CTV entirely, and shouldn't have to pay twice for something it has long owned - at least partly.
"We paid, dearly, for the privilege of owning that asset in 2000," Mirko Bibic, Bell's senior vice-president of regulatory and government affairs, said following the release of documents related to BCE's application to the Canadian Radio-television and Telecommunications Commission.
BCE is paying $1.3-billion for the 85 per cent of CTV is doesn't already own. Including debt, the value of the deal is $3.2-billion, implying a $320-million payment, if valued at the full 10 per cent, under the tangible benefits policy.
The newly released documents also provide a glimpse into the finances of CTVglobemedia, which since 2006 has operated as a private company with four main shareholders - BCE, Ontario Teachers' Pension Plan, Woodbridge Co. Ltd., and Torstar Corp. (Woodbridge owns 40 per cent of The Globe and Mail and is in the process of increasing that stake to 85 per cent.)
The documents show that while conventional television continues to produce little in the way of profit, CTV's specialty channels enjoyed a strong rebound in 2010. That group's revenue grew 8.8 per cent, to $694-million, and it earned more than $200-million, before interest, taxes, depreciation and amortization.
BCE is not the first company this year to ask for a discount from the CRTC on a big content deal. Shaw Communications Inc. asked for a significantly smaller tangible benefits package this fall when it went before the CRTC for approval of its deal to buy the TV assets of CanWest Global Communications Corp.
In the end, Shaw ended up paying more than twice what it wanted to. Industry watchers say BCE's even steeper request, for benefits to be eliminated altogether, will be an uphill battle.
"They're going to have some persuading to do," said Sheridan Scott, a partner with Bennett Jones LLP in Ottawa and an expert in regulatory matters.
In case the CRTC is not persuaded, BCE has proposed a $220.8-million package as its second choice. The money would be set aside for production of new media content; for more TV transmitters to expand the digital conversion happening this year, beyond the ones where conversion is mandatory; and for more resources devoted to local news.
That proposal copies a key element of the Shaw package. Because CanWest was coming out of creditor protection, the CRTC allowed Shaw to pay less than 10 per cent of the value of its most troubled assets - conventional over-the-air TV stations. BCE wants the value of CTV's conventional stations also to count for less, so that if it does have to pay, it won't be the full amount.
Ms. Scott is skeptical. "CTV is hardly in distress. There's no doubt that it's having a challenging time, as are others. But … there's a precedent where there are allowances made for [restructuring] It's not 'business is tough.'"
BCE will also be using another of Shaw's arguments: the notion that there are "intangible" benefits to the deal that offset the need to pay more.
"The potential for this transaction, how it can benefit Canadian broadcasting, is immense," Mr. Bibic said. "Viewers are ready to consume this content in the traditional way, and on new platforms, and with us behind CTV, CTV can do great things."