Bell Canada, a subsidiary of BCE Inc. (BCE - Analyst Report), has received a green signal from Canadian Radio-television and Telecommunications Commission (CRTC) for Astral Media. The deal will make BCE an undisputed leader in Canada’s media space.
However, CRTC has imposed certain conditions like adhering to the regulators’ code of conduct for commercial agreement, restricting anti-competitiveness and treating the independent distributors and programmers fairly. Furthermore, the company has to spend $72 million more than its proposed $246.9 million on tangible benefits over seven years.
CRTC states that the deal positions Bell as a 22.6% owner of the country’s French TV market, boosting its competitive position in the Quebecor-dominated market.
In Mar 2012, Bell took the first initiative to acquire Astral by offering $3.38 billion. However, CRTC rejected the deal citing that it would result in extreme dominance of Bell Canada in the broadcasting sector. Bell also received tough opposition from Rogers Communications Inc. (RCI - Analyst Report), which wanted the divesture of The Movie Network as a condition for approving the deal.
In Nov 2012, Bell submitted a renewed bid that focused on addressing the regulatory concerns of CRTC. Additionally, in Mar 2013, Bell decided to sell Astral’s stake in 11 speciality channels and 10 English language radio stations to ease the monopolistic condition within the Canadian broadcast market.
Post the deal, Bell Canada will have 84 radio and 25 television stations, including the very popular The Movie Network and French language pay-TV service, Ecran. Acquiring Astral will increase Bell’s share in the English-language market to 35.8%. Astral will also provide Bell Canada with vast content that will make it more competitive against online streaming companies like Netflix Inc. (NFLX - Analyst Report).
We believe apart from enhancing Bell’s presence in Quebec, the deal will provide Bell’s customers with various programming options. On the flip side, the deal will reduce the carrier choices for the customers and could eventually face monthly fee hikes.
Currently, BCE Inc. carries a Zacks Rank #3 (Hold). Another stock to consider in the Canadian broadcasting industry is Telus Corp. (TU - Analyst Report), which carries a Zacks Rank #2 (Buy).