Canada's broadcast regulator has signalled it would clear the way for BCE Inc. to bulk up in Quebec as it resurrects its bid for Astral Media Inc, provided the media giant unloads television and radio stations in the rest of the country and does a better job of explaining how its $3-billion takeover would benefit Canadians.
The Canadian Radio-television and Telecommunications Commission warned BCE and Astral Media when it rejected the first takeover bid that it was concerned that a combined company would control too much of the Canadian market, including Quebec.
But a source within the broadcasting commission told The Globe and Mail that those concerns wouldn't necessarily scuttle a restructured takeover deal if English-language stations were peeled away from the merged entity.
And in Quebec, there would be a strong counterweight to BCE's bulk: Quebecor Inc. would still be the largest media player in the province.
On Monday, BCE resurrected its failed bid, saying it heard the message sent by Canada's broadcast regulator "loud and clear" when its original deal was rejected because of concerns of market dominance. As The Globe reported last week, officials with both companies met with the broadcast regulator after the rejection of the original deal to better understand how to revise the takeover bid.
While the takeover would see Bell control about 90 specialty channels and more than 100 radio stations across the country in both languages, one of its goals when announcing the deal was to add more French programming so it could better compete with Quebecor.
BCE's arch-rival accounted for 35 per cent of viewership of French television viewing in 2011, while Bell only accounted for 6 per cent. Astral, meanwhile, owned 26 per cent of the market and would help Bell increase its presence in the province.
Sources say the new bid, which has not yet been made public but has been filed with the CRTC, outlines which English radio stations and television services the company is willing to part with in order to reduce its viewership numbers in English Canada – a key reason the previous deal was rejected.
"We feel really good about this one," said Mirko Bibic, the company's chief regulatory officer. "We need to move away from the mechanics of the transaction and say there's a vision here, and that's to deliver more to both viewers and listeners."
Because the company filed a new application to the CRTC, the entire process that led to the first deal's rejection must unfold again. That means CRTC staff is now reviewing the submission, and will let the public see the details of the proposal when it opens the case for public comments prior to a hearing.
Bell needs to do more than convince the regulator it won't have too large a market share. It must also show its deal will benefit Canadians, something that it admits it underestimated going into the last hearing.
The new submission tries to demonstrate how the combined company would develop Canadian talent and would contribute to public life through charitable initiatives.
"We need to show how that together the whole is greater than the sum of its parts," Mr. Bibic said. "We really, really want to hit it out of the park in terms of Canadian content, showcasing Canadian talent and stabilizing local television and radio stations."
While the CRTC reviews the new deal, work is already under way to unload some radio stations. Bell previously announced it would sell 10 stations across the country, including in Ottawa and Vancouver, to ensure it didn't surpass ownership thresholds in those markets. People familiar with the radio auction said BCE, which owns 15 per cent of The Globe and Mail, is in the final stages of negotiating the sale of the stations.
It will also entertain offers for some of its English television channels, which include properties such as HBO Canada, The Movie Network, Teletoon and TSN (although it would be unlikely to sell some of its most popular offerings).
The deal also "includes a revised package" of tangible benefits, the company said, but didn't elaborate on how it would distribute the money it is mandated to spend as a condition of the deal.
Its previous plan included building out broadband services in Canada's north and a platform-neutral "Netflix alternative" that would allow subscribers to access the company's content on phones and tablets.
Canaccord Genuity analyst Dvai Ghose said in a note that it could be a month before more details emerge, and decisions from the CRTC and Competition Bureau may not come until next year. Indeed, the new proposal extends the deadline to get a deal done to June (from January). "We would not by any means assume at this stage that a revised bid will be successful," he said. "At the very least, this saga could go well into 2013."
BCE, through its Bell Media division, is offering Astral class A common shareholders $50 a share, while class B subordinate shareholders would receive $54.83. That's the same as the previous offer, although they've thrown in a 50-cent-a-share dividend payable Feb.1 to current shareholders.
While the deal offers $50 each for Astral's common shares, they only gained 3.1 per cent to $45.78 as investors weighed the likelihood of the deal closing. Analysts said they believed the companies would reduce its overall viewership numbers through asset sales, but they weren't sure how to assess the less measurable risks introduced by the CRTC when it said the original deal didn't provide enough benefits to Canadians.
The shareholders voted 99 per cent in favour of the deal already, and any change in the offer price would have required a new vote.