My prediction for the CRTC’s decision on Bell-Astral, round two, is that it’s coming next week.
Everyone is talking about which way the regulator will go, with a little bit of nervousness in the air. Why? Because last fall, everyone seemed to get their Bell-Astral predictions wrong. The fear now is that they could get them wrong again.
The CRTC, at a hearing in May, took second look at BCE’s proposal to acquire Astral for $3.38 billion.
The CRTC denied the first application in a surprise decision last fall, saying it was not in the public interest and that it had concerns about BCE’s resulting market power. BCE and Astral came back to the CRTC with a reworked proposal and an agreement with the Competition Bureau in March to sell off 12 specialty channels, including Teletoon and Disney, with half going to Corus Entertainment Inc.
Well, that should be enough for an approval, right?
Broadcasting industry sources, speaking on background, say they can’t be sure what the CRTC will do with the new application. Will it outright deny it again? Could it effectively deny it by ordering more divestitures (e.g. TMN) that are deal breakers for BCE? Will it approve it with more conditions to limit BCE’s market power? And more broadcast regulations applying to big, converged companies? How will the commission’s focus on consumer interests influence the decision?
“We are applying a more rigorous public interest test for ownership transactions,” CRTC Chair Jean-Pierre Blais said in a speech this month at the Banff World Media Festival in Alberta. “Our [BCE-Astral] decision last fall sent a clear signal that the public interest is paramount. It is the lens that Parliament has entrusted to us, under legislation, and we fully intend to carry out that public trust.”
Blais said the commission needs to ensure “no citizen is left behind,” and that the regulator’s decision making process will mean “sometimes being audacious” with intervention and in other cases taking a “step back” and deregulating.
What did that speech mean in terms of Bell-Astral? Other than consumers won’t take a back seat, I don’t know.
Bloomberg reported June 17 that the roughly $1.50 gap between Astral’s stock price and the $50 per share in the deal means “investors anticipate a positive decision by the regulator.” The gap has “averaged 2.7% over the past month,” which “compares with 3.6% in the month before the previous decision on Oct. 18,” Bloomberg reported.
The Wire Report also reported this month on the “short positions” in Astral. Investors with short positions borrow stock, sell it high and then buy it back low, profiting from its fall, and short selling in Astral, this time around, is far lower than last year.
The short position in Astral’s stock represents only 0.18 per cent of shares, while last year, before the CRTC denied the deal, short positions in Astral were at 6.25 per cent.
According to the markets, another denial is unlikely.
For Veritas Investment Research, according to its research note this month, Blais’ speech indicated the regulator may make a second “audacious” regulatory decision following this month’s wireless code decision, which effectively reduced three-year wireless contracts to two years.
I’ll make a prediction on when the decision is coming. As for its contents, I’ll leave that up to you.