BCE argues for no benefits payment on CTV transaction

BCE Inc. is telling the CRTC that its purchase of CTVglobemedia Inc. is a simple “reversal” of its 2006 divestment of ownership from CTV and that the company should not be required to pay any new benefits into the broadcasting system as a result of the transaction. Bell now holds 15 per cent of the voting shares in CTV, but has reached an agreement to purchase the remaining 85 per cent from the Thomson family’s Woodbridge Co., the Ontario Teachers’ Pension Plan and Torstar Corp. In 2000, BCE bought an ownership stake in CTV but sold it off in 2006. That transaction involved a tangible benefits commitment of $386.6 million. “Under contractual arrangements approved by the Commission, BCE always retained a path to control, something it is now doing by reacquiring control of CTV,” BCE wrote in a brief filed with the commission in September. “The purchase of the minority interests of Teachers and Torstar are simply a reversal of the 2006 transaction.” The commission has opened a proceeding on Bell’s acquisition of CTV and scheduled a public hearing for Feb. 8, 2011, in Gatineau. The CRTC generally requires that a percentage of broadcasting transactions, traditionally about 10 per cent, be paid to support Canadian broadcasting through a “tangible benefits” package. BCE says it has yet to pay more than $110 million of the $386.6 million in benefits it agreed to pay in the 2000 deal for CTV. “It is clearly at least an intangible benefit of this transaction that, notwithstanding the significant loss in value of the underlying assets, BCE will continue to honour the commitments it made in the past,” BCE wrote in the brief. “Requiring BCE to pay benefits twice on acquiring sole control over the same company consistent with contractual arrangements the CRTC already approved, would be punitive and amount to ‘double taxation.’” In an interview, Mirko Bibic, Bell’s senior vice-president of regulatory and government affairs, confirmed that Bell maintains it should not have to pay any benefits—what he calls a “tax”—and that the position is consistent with CRTC policy. When asked whether he is confident the commission will accept that position, Bibic said: “We have our arguments. They’re sound, and we’ll put our best foot forward in February.” But in the event that Bell’s arguments do not win the day, the company has put forward a $220-million benefits proposal. In a Dec. 3 letter, after repeated requests from the CRTC for a benefits package consistent with commission policy, BCE filed a final proposal for benefits amounting to $220.8 million over seven years. The package is derived from a 10 per cent rate on the value of the specialty assets, six per cent on radio assets, and five per cent on CTV’s conventional TV assets. Bell’s arguments against a benefits package come on the heels of the CRTC’s proceeding this year on Shaw Communications Inc.’s $2-billion acquisition of Canwest Global Communications Inc.’s broadcasting assets. Initially, Shaw proposed a $50.6-million package, but after questions from the CRTC, increased that to a $203-million package that included an outstanding $95 million leftover from the 2007 Canwest-Alliance Atlantis deal. By the end of the proceeding, Shaw’s final package included $180 million in new benefits plus the $95 million carried forward from the Alliance Atlantis purchase. In its tangible benefits proposal, Bell has taken some ideas from the Shaw deal. The company argues that it should only have to pay a five per cent tangible benefits rate on conventional television assets, as Shaw did. “BCE supports the concept of a reduction/elimination of tangible benefits with respect to conventional television assets,” BCE said in an Oct. 25 letter to the commission. “CTV’s conventional television assets face comparable financial challenges to Canwest’s.” Like Shaw, Bell proposed spending $10.8 million on free local television satellite services for communities whose broadcasters are not required to switch to digital, over-the-air television broadcasting when analog signals cease next year. Bell also proposed spending $84 million on increasing its satellite television capacity through a conversion to higher-quality MPEG-4 set-top boxes. Right now, not all local television stations are carried on direct-to-home satellite services due to capacity shortages. During a hearing on direct-to-home satellite services last month, Bell told the CRTC the conversion to MPEG-4 was too expensive. “Let’s direct some of the money to increasing satellite capacity, and then Bell satellite TV would distribute every single last local TV station in Canada that meets the requirements,” Bibic said Friday. In a release Friday, the Canadian Media Production Association (CMPA), said the benefits package should represent a minimum of 10 per cent of the value of the acquired television assets. “BCE’s first choice is to contribute nothing,” Norm Bolen, president and CEO of the CMPA, said in a release. “And, its second choice falls way short of the mark of what is expected under the CRTC’s tangible benefits policy.” At least 85 of the benefits should go to on-screen initiatives, 75 per cent of which should “directly benefit the independent production sector,” the CMPA said. Bell reported to the commission that the total value of the CTV transaction is $3.2 billion, including $1.5 billion in equity and $1.7 billion in debt. Not all of the total transaction is for broadcasting assets, however. Bell estimated the value of CTVglobemedia’s conventional television stations at $262 million; its specialty services at $1.9 billion; its radio assets at $318 million; and its non-broadcasting assets at $139 million. Sheridan Scott, a partner at Bennett Jones LLP who worked on the original Bell-CTV transaction in 2000, said she is not aware of any precedent where a company is repurchasing a broadcaster. She said the commission may have to return to “first principles” and look at the purpose of its benefits policy. “But we certainly see them acquiring control, and that normally triggers benefits,” she said. Scott added that it may not be easy to convince the commission to give Bell a five per cent benefits policy on the value of conventional television stations. In Shaw’s case, she pointed out, the company was buying broadcasting assets under creditor protection. sdoyle@thewirereport.ca

BCE argues for no benefits payment on CTV transaction

News | 12/10/2010 10:22 pm EST

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