Cogeco warns it would abandon Corus purchase if CKOI excluded

MONTREAL—Cogeco Inc. will abandon its acquisition of Corus Entertainment Inc.’s 11 Quebec radio stations if Montreal’s popular French-language music station CKOI-FM isn’t part of the deal, Yves Mayrand, Cogeco’s vice-president of corporate affairs, told the commission Tuesday. “You can’t take a package transaction like this one and say, ‘We’ll take away one of the major assets that largely justifies the transaction and we’ll leave Cogeco … with only unprofitable stations,” Mayrand said. “If CKOI-FM can’t be part of this transaction, then sadly there will be no transaction with Corus.” He added that CKOI-FM is the “best technical platform” of all the Corus stations and “an extremely important, crucial service to ensure Cogeco’s ability to compete with its principal adversary for male audiences aged between 25 and 54.” Mayrand made the comments as part of Cogeco’s presentation during the first of two days of CRTC public hearings on the acquisition in Montreal. Cogeco focused its presentation on what it described as a critical move to be able to acquire three FM and one AM stations in the Montreal area. But the four-station ownership in Montreal would go against the CRTC’s common ownership policy, which states that a company cannot own or control more than two AM and two FM stations in the same language in a large radio market. During Tuesday's hearing, regional commissioner Suzanne Lamarre noted that the CRTC rarely makes exceptions to such policies. But in its opening statement, Cogeco said the CRTC’s common ownership policy is not a rule cast in stone. “A policy is not a regulation, and even less a law to which no change can be allowed. Nor is it an inflexible rule to be applied blindly without any regard for circumstances and facts that fully justify an exception in our case,” said Caroline Dignard, Cogeco’s director of judicial affairs. When pressed by Lamarre, who asked whether Cogeco has a back-up plan if its request is denied, Mayrand said the company had considered converting one of the stations to an English-language service. “Evidently we rejected this option, because it would have been a really bad hit for the balance between French and English radio services ,” Mayrand said. CRTC commissioner Michel Morin said he understood Cogeco’s reluctance to exclude CKOI from the deal, since it represents about half the transaction’s value. Morin suggested that Cogeco could instead convert one of the Montreal FM stations into an extra AM station. But Richard Lachance, vice-president of Cogeco Radio, rejected the proposal. “You’ll understand that AM radio today, Mr. Morin, unfortunately doesn’t have its place anymore in modern formats,” he said. Mayrand suggested the company could exclude Montreal talk-radio station CHMP-FM from the deal if the commission doesn’t grant the exception—despite the fact that it is one of only four profitable stations involved in the transaction. Lamarre expressed concern that Cogeco wouldn’t find a buyer for the station. Mayrand said it was a risk the company would be willing to take, but that a potential buyer might want to change the station’s talk format. He added that losing the station would harm Corus’ other AM stations across the province. “We’d find ourselves with isolated AM stations—isolated in Montreal, isolated in Sherbrooke, isolated in Trois-Rivieres and isolated in Gatineau. That’s why we say in our presentation there’s a real risk of causing … irreparable damage … to this group of stations that work together under Corus,” Mayrand said. Selling CHMP-FM could create another problem for Cogeco. The company is planning to make the station the heart of its proposed news operation, Cogeco Nouvelles. “After selling the station … we will have to continue to try to function in regional markets like Gatineau with the limited resources we now have there. Why? Because we won’t have the heart of the operation, of the news and information service, that is CHMP,” he said. But when Lamarre asked whether Cogeco, without an exception, could proceed with the deal in its entirety, including the launch of the news agency and a nine per cent broadcasting benefits package, Lachance responded: “The answer is no." During its presentation, Cogeco argued that it should be granted the exception because the stations are in Montreal, a unique market with a bilingual audience. Cogeco added that granting the exception would help it compete with current market leader Astral Media Inc. Astral Radio vice-president of corporate and regulatory affairs Claude Laflamme said at Tuesday’s hearing that Cogeco’s request for an exception is not justified. “Cogeco’s request does not meet either of the commission’s two criteria that are necessary for an exception to common ownership policy,” Laflamme said. “In fact, Cogeco did not present any technical problem … Nor did it show the survival of the market’s stations depended on granting the exception, as demands the commission.” Astral Radio president Jacques Parisien said granting the exception would open the door to similar requests. “We would have a lot of difficulty living with a precedent, and we would even consider looking at our options in terms of having the same approach to get more frequencies in the same market,” Parisien said. Cogeco declined to comment on Astral’s position after the hearing. Solange Drouin, vice-president of public affairs and director-general of the Association Quebecoise de l’industrie du disque (ADISQ), said the CRTC should grant the exception if in exchange Cogeco is required to broadcast a wide variety of local artists on its new stations. “If the CRTC felt open to this exception, it should accompany it with an obligation for Cogeco … to not centralize all its music programming in one location,” Drouin said. Two regional community groups that also spoke at the hearing Tuesday, Coalition pour la survie de CHLN FM and the Coalition de citoyennes et citoyens de l’Estrie, said they support granting Cogeco an exception for the Montreal market. The groups said they believe the advantages the transaction presents for regional stations and the Montreal market greatly surpassed its inconveniences. The CRTC will issue its decision on the acquisition within 35 days of the hearings. Lachance said the company hopes to close the transaction before Dec. 1, 2010. kfournier@thewirereport.ca

Cogeco warns it would abandon Corus purchase if CKOI excluded

News | 09/28/2010 11:08 pm EDT

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