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Ian Greenberg, president and CEO of Astral Media IncTim Fraser/The Globe and Mail

Astral Media Inc. shares tumbled almost 16 per cent Friday in response to a stunning regulatory decision that blocks a $3.4-billion friendly takeover of the radio, television and billboard company by BCE Inc.

Astral's A shares fell $7.49 to close at $39.51 in trading on the Toronto Stock Exchange

The shares had been trading at about $36.25 before the deal was announced on March 16 but immediately shot up after Bell was set to pay $50 per share for Astral's class A non-voting shares and $54.83 for the company's class B subordinate voting shares.

Astral stock remained above $49 for months but fell slightly after opposition to the deal intensified in August and investors began to speculate federal agencies would require changes to appease concerns about concentration of media ownership and the impact on BCE's rivals.

For the most part, however, industry watchers had expected the deal go through with some modifications but it was rejected outright on Thursday by the CRTC.

BCE Inc. shares closed down 77 cents to $42.86.

BCE Inc. said Thursday that it will call on the federal Cabinet to intervene but a CRTC spokesperson said a challenge would have to go to the Federal Court of Appeals rather than to the government.

The surprise decision by the CRTC was announced after stock markets closed Thursday and marked the first major ruling for newly installed commissioner Jean-Pierre Blais, who took over in late June.

Not only did Blais turn down one of the biggest takeovers ever submitted to the CRTC, he left little doubt about where he stood, or how he would respond should BCE return with a modified but essentially similar proposal.

"This transaction would have resulted in an unprecedented level of concentration in the Canadian marketplace and we had grave concerns that BCE would be able to use its market power in an unfair manner and engage in uncompetitive behaviour," Mr. Blais said.

"Simply put this was not a good deal for Canadians" that could have restricted choice and raised prices of services, he added.

Bell claims the deal would have given it control of 33.5 per cent of the English-language TV market, a level it says should have been approved under guidelines set out in the CRTC's Diversity of Voices policy, which governs the level of media concentration in Canada.

But Mr. Blais said that had the regulator allowed the deal, BCE would have controlled almost 45 per cent of the English TV viewership and almost 35 per cent of the French. As well, it would have become the largest radio station operator in Canada and would have controlled over half of TV pay and specialty services.

"At the end of the day, BCE demonstrated clearly that the proposed transaction would be good for BCE, but we were not persuaded that it was in the best interest of Canadians," he said.

Scotiabank telecom analyst Jeff Fan said without Astral, BCE's dividend strategy could be threatened because Astral's cash flow would have been an important source of funding it.

"The No. 1 reason this is negative for BCE is that we believe its dividend growth strategy is now compromised without Astral," Mr. Fan wrote in a research note.

Mr. Fan also said Astral should still be in play, but the rules are now unclear as to who can buy it.

"Rogers is likely interested in some of the assets but may not be allowed to buy all of Astral," Mr. Fan said in a research note.

"There has also been speculation that Cogeco and Corus could partner to acquire Astral. But Cogeco just made its bet in the U.S. with Atlantic Broadband. And like Rogers, with Corus being considered under the Shaw umbrella, it may not be able to pursue this, as it will likely be considered another vertical transaction by Shaw," Mr. Fan said.

Had the CRTC approved the deal, it would not have been clear sailing for Bell.

The Competition Bureau had indicated it was "increasingly concerned" about the deal.