|
Media deals may bring end to foreign ownership rules
Barbara Shecter, Financial Post · Monday, Sept. 13, 2010
A recent string of media deals is making it more palatable for the federal government to drop foreign ownership restrictions to bolster the fortunes of startup mobile phone companies, industry watchers said Monday.
Industry Canada is contemplating removing foreign ownership caps on telecommunications companies, but not broadcasters and other cultural communications assets. Most of the biggest telecommunications companies in the country own, or are in the process of buying, broadcasters. Thus, they could not be bought by foreign players even if ownership restrictions on telecommunications providers are removed.
The blockbuster $3-billion purchase of CTV, if approved, embeds “a poison pill” in buyer BCE Inc. even if ownership rules are liberalized for wireless, cable and satellite carriers, said Dvai Ghose, an analyst at Canaccord Genuity.
“No such review is expected for the foreseeable future [for broadcast ownership],”
Last Friday’s combination of BCE and CTV is just the latest corporate coupling of media creators and the companies that carry their content. The deal is headed to regulators amid a drive to package and barter programs for broadcast on mobile devices.
A handful of startup mobile phone operators such as Wind Mobile and Mobilicity, licensed by Industry Canada to increase competition and bring down wireless rates, have been left out of the frenzy. Analysts say they could soon find themselves starved of TV shows to push through their phones to drive sales.
If foreign ownership restrictions are not lifted to allow foreign players to step up and bolster the upstarts with cash injections, and potentially content deals for top-rated TV shows and sports, “I would argue that one or two of the three independents will be gone shortly,” a veteran Toronto-based telecommunications analyst said Monday.
Industry Canada has been reviewing foreign ownership limits since March. The government ministry laid out three possible options.
Those options include unfettered foreign ownership of players with less than 10% market share, or a complete removal of the rules, which prohibit non-Canadians from owning more than 46.7% of a telecommunications company.
A third option is to raise the allowable foreign ownership level to 49%.
“If they only do the 49% thing, then new entrants will see no benefit,” said the telecommunications analyst, who requested anonymity. He called the final option of slightly raising the minority cap “a useless waste of time” because neither incumbents nor new entrants could be controlled by foreigners.
“A move to at least 50.1% is needed to make any meaningful difference from what we have today,” the analyst said. “I would have thought that BCE-CTV deal, on top of the cross-ownership of telco and broadcast assets that already existed, would have allowed [Industry Minister Tony] Clement to open the floodgates above 50%.”
The media landscape has changed dramatically in the past 24 months.
First, Canada’s largest cable company, Rogers Communications Inc., jumped seriously into the broadcasting business when it bought Toronto-based conventional and specialty television broadaster Citytv. Then, cable and satellite carrier Shaw Communications Inc. bought the network and specialty TV operations of Canwest Global Communications, a move that is awaiting approval from the Canadian Radio-television and Telecommunications Commission.
Finally, last week’s purchase of CTV by BCE put the last of Canada’s large private broadcasters into the hands of a satellite and wireless distributor, pending regulatory approval.
Industry watchers say the poison pill effect of the broadcaster-distributor combinations could be thwarted by a spinoff of the businesses into separate companies, an appealing move if a foreign player was willing to pay a premium price for unfettered ownership of a large Canadian telecommunications company.
Cable giant Shaw Communications, for example, spun its media businesses into a separate company called Corus Entertainment Inc. in 1999 and created value, notes Mr. Ghose.
“Of course BCE could spin out CTV,” said the Canaccord Genuity analyst, who doesn’t buy into the rationale for the marriage of the distribution and content companies. He said such a spinoff would bolster his view that the content operations were “not integral” to distributors in the first place.
|
