The CRTC, Canada’s broadcast and telecom regulator put the kibosh on BCE’s planned $3.4 billion take-over of Astral Media. One consequence will be less investment in the north.
Astral stock fell on Friday after the Canadian Radio-Television and Telecommunications Commission (CRTC) said on Thursday that the $3.4-billion deal would give too much market power to BCE, already Canada’s biggest telecoms company and owner of numerous TV and radio assets.
BCE had promised a $40 M investment in northern wireless infrastructure through its wholly owned subsidiary Northwestel Inc. “We will no longer be able to go to every community in northern Canada,” Northwestel President Paul Flaherty said. “What that’s going to mean practically is that some of the smallest communities will have to come off the table and really the issue there is it’s not economically feasible for us to do it on our own,” he said. Under the plan, all communities in the three territories would have had access to new services, including high-speed internet access and 3G or 4G wireless, Northwestel had said. Flaherty added the company will still spend $233 million on expansion and upgrades by 2017.
BCE (ticker BCE) is Canada’s largest telecom company and a major media conglomerate. It has a market cap of $33 B.
Northwestel Inc. is a wholly owned subsidiary that provides telecom services to the three territories and northernmost BC. The company has a terrestrial network in the west and a satellite presence in the east where there are no fibre or micro-wave facilities.
The CRTC late in 2011 ruled against Northwestel’s application for rate changes and for modestly higher subsidies (from southern ratepayers).
The CRTC under its new Chairman has shown an interventionist bent, ruling that there would be too much broadcast concentration with the Astral deal. The decision was made on the basis of broadcast industry factors. Unfortunately the loss of the $40M of the “public benefits” package will affect Northwestel’s capital investments in telecom assets ie. fewer northern communities with modern wireless technology.
The CRTC should be careful. It has made two rulings ‘against’ Northwestel, one on rates/subsidies and one on investments. Investor-owed companies need to earn a return and the north with its thin population and extra-ordinarily high costs make any investment business cases problematic.