Bell, Rogers to keep MLSE separate given ‘competitive dynamic’

BCE Inc. and Rogers Communications Inc. will keep their Maple Leaf Sports and Entertainment (MLSE) properties separate from the companies' other corporate operations given “the competitive dynamic” between them, the companies said in CRTC filings released Thursday. “Given the competitive dynamics between both ownership groups, no integration between MLSE and either or both purchasing groups is anticipated,” the companies said in an April 13 letter to the commission regarding their shared purchase of MLSE and its broadcasting companies the Toronto Maple Leafs Network Ltd. and Toronto Raptors Network Ltd. In December, the two rival telecommunications companies announced a joint bid to purchase a 75 per cent controlling stake in MLSE, which owns the Toronto Maple Leafs and its minor-league affiliate the Toronto Marlies, as well as the Toronto Raptors, Major League Soccer's Toronto FC. Before they can complete that deal, Bell and Rogers must obtain CRTC permission to transfer control of the broadcasting licences to operate specialty channels Leafs TV, NBA TV and Gol TV, which are owned by MLSE. On Thursday, the CRTC released the companies’ filings to transfer control of those specialty channel licences and opened a public consultation on the deal. In the April 13 letter, Bell and Rogers responded to commission concerns about “competitive advantages” the deal could offer the companies and how that could impact a third-party calculation of the value of the broadcasting properties. “Both purchasing ownership groups involve major vertically integrated entities each of whom would be able, independently and/or on a combined basis, to achieve significant competitive benefits/synergies,” the commission wrote in an April 10 letter to the companies. “Examples of such benefit include distribution of sports programming from purchased licensees offered through mobile services already owned by both the purchasers,” the letter said. Bell and Rogers said MLSE will “continue to operate independently” and that neither company would benefit from “cost synergies.” They said both companies are seeking to secure mobile rights to MLSE content “on commercial terms” subject to outside approval—presumably with the sports leagues. “Given the existence of a minority partner in MLSE (along with League review and approval requirements), all content rights agreements between either purchasing group and MLSE have been conducted at fair market value,” the companies said. The commission’s concern about “cost synergies” stems from a need to calculate the value of the broadcasting properties and determine how much the companies should pay in “tangible benefits” associated with the purchase. Commission guidelines require companies that purchase broadcasting properties to pay about 10 of the value of the transaction to funds or projects to support the Canadian broadcasting system. The broadcasting properties represent a fraction of the $1.32-billion MLSE deal. Bell and Rogers hired accounting firm Ernst & Young to complete a third-party review of the specialty channels’ value, which pegged Leafs TV’s value at $19.371 million, NBA TV’s at $20.879 million, and MLSE’s 80.1 per cent stake in Gol TV at $10.863 million. The firm said two other specialty service licences held by MLSE had no value because they are not operational. As a result, Bell and Rogers proposed a $3.833 million tangible benefits package that would provide “a ‘one-stop shopping’ opportunity for the production of high-quality sports-themed programming” in Canada. They pledged to honour $559,689 in tangible benefits that MLSE owes from its 2009 purchase of Gol TV. To help ensure the shared MLSE holding remains separate from Bell's and Rogers' other business interests, the companies have agreed to joint-ownership over a new holding company, 8047285 Canada Inc. (BR Holdco), which will own and control the shared MLSE assets. The companies said in documents filed with the commission that they agreed to stipulations allowing either company to contest deals between a rival subsidiary and their shared broadcasting properties. Any dispute could be sent to an arbitration process, the companies said. In a document filed with the commission Jan. 23, the companies said their joint purchase of MLSE “will provide cost certainly” for both companies “for certain sport broadcast rights” and will improve their ability to offer that content on multiple platforms. “It will also ensure that neither Bell nor Rogers has exclusive rights to all MLSE content going forward, thereby providing the potential to spread the content over multiple services,” the companies said. The companies said they would not diminish other broadcast distributors’ abilities to carry games broadcast on Bell’s and Rogers’ networks, and said the CRTC’s guidelines for vertically integrated companies will provide “ample protection” to competing distributors. They wrote that “there is no danger of subscribers of competing wireless providers or Internet service providers (ISPs) being precluded from accessing content that Bell or Rogers makes available to its own subscribers on-line or via their wireless networks.” news@thewirereport.ca

Bell, Rogers to keep MLSE separate given ‘competitive dynamic’

Broadcast | May 18, 2012

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