BCE Inc. has agreed to acquire full ownership of CTV Inc. in a $1.3-billion deal that dramatically reshapes the landscape of Canadian media and telecommunications, and changes the ownership structure of The Globe and Mail.
The merger of Canada's largest telecom carrier and the country's No. 1 broadcaster is the latest in a series of deals heralding a new era of convergence between media companies and the cable and phone giants that distribute their content.
"This is truly an historic day for Bell," said George Cope, BCE's president and CEO, on a call with analysts on Friday morning. "We are purchasing 100 per cent of Canada's No. 1 media company."
"I think he got CTV cheap," said Ivan Fecan, CTV's chief executive officer, referring to Mr. Cope. "We have emerged from the recession and the market is picking up, and given our very strong leading positions in speciality and conventional and radio, we're incredibly well positioned to benefit from the market picking up."
Later in the day, Mr. Fecan told CTV staff in a memo that he planned to retire once the regulatory process for the deal was complete.
With the deal, which has yet to be cleared by federal regulators, Bell Canada Enterprises acquires all of CTV's television assets, including the CTV network and specialty cable channels such as TSN, Bravo and the Business News Network.
The transaction also breaks apart CTVglobemedia Inc., created a decade ago when CTV merged with The Globe and Mail. Woodbridge Co. Ltd., the holding company of the Toronto-based Thomson family, will regain majority ownership of the Globe with an 85-per-cent stake. BCE will retain its current 15-per-cent share of Canada's largest circulation national newspaper and its related websites.
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"The pleasure for me is immense today," David Thomson, chairman of Woodbridge, said. "We are blessed with an extraordinary business in Thomson Reuters. The Globe really matters to the family. We are now ready to put teams together to innovate and implement. We are the premiere content provider in this country, and we only seek to become better."
Phillip Crawley, publisher of The Globe and Mail said: "We suddenly just don't separate from CTV. We've got all kinds of relationships with CTV. They'll carry on for the time being."
BCE's move into broadcasting has obvious echoes of then-CEO Jean Monty's bid in 2000 to form a converged media and communications empire, first by spending $2.3-billion to acquire CTV, then by combining it with the Globe to create Bell Globemedia, in which it had a controlling stake of about 70 per cent.
That experiment was eventually rejected by the market, and in 2005, Mr. Monty's successor, Michael Sabia, sold off the bulk of BCE's stake to Woodbridge, The Ontario Teachers' Pension Plan and Torstar Corp. The company was then renamed CTVglobemedia to reflect Bell's diminished influence.
This latest move marks the departure of Teachers and Torstar, which held 25 and 20 per cent, respectively, of CTVglobemedia. BCE put the total transaction value at $3.2-billion, including debt.
For CTV, being part of BCE gives the media company an assured spot in the 130-year-old telecom company's national communication lines, which consist of TV, Internet and wireless networks. It also guarantees CTV that as other distribution companies sew up exclusive content arrangements and strike deals, the media company won't be left behind.
Also, as television audiences increasingly migrate to watching video online, CTV's relationship with Bell, which has millions of Internet customers, might allow the broadcaster to more effectively hang on to its audience and wring profit from ratings.
For CTV, this bodes well for advertising, said Mr. Cope. "The more screens, the more revenue," he said.
For Bell, buying back control of CTV appears to be a response to its rivals' moves in the market. The acquisition of one of Canada's premier media properties represents an opportunity for Bell to spread content across multiple platforms, including on its ubiquitous satellite TV service and its brand new Internet-based TV networks.
"Video and TV is going to be very important to Bell Canada's future," Mr. Cope said. "Mobile TV acceleration is an excellent thing for Bell's business model."
More importantly, though, it may give Bell an edge in its battle for market share against other smart phone providers, and in particular against Rogers Communications Inc. and Quebecor's Inc.'s Vidéotron unit. Increasingly, wireless carriers are flogging exclusive content arrangements to make their wireless devices appear more attractive in a market that has seen a new wave of competition.
"The top three cable competitors to Bell have increased their media ownership and all are, or will be, in the wireless business," Mr. Cope said. "Clearly, we're not prepared to buy all our content from our competitors."
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Mr. Cope said that as media content prices continue to rise, the CTV acquisition will result in big savings: "Given how signfiicant we believe video and TV will be for us going forward, it will be significant."
Rogers has already begun experimenting with video content designed specifically for smart phones. Calgary-based Shaw Communications Inc., the most powerful cable company in Western Canada, put down $2-billion in May to buy CanWest Global Communications Corp.'s TV assets in a clear bid to ensure the company could offer content, some exclusive and some not, over phones, iPads or other wireless devices. At the time, perhaps wary of Bay Street analysts' fears of another round of ill-advised gambles on convergence, Shaw president Peter Bissonnette said: "This is not about convergence, this is about multiple platforms."
One of the principal difficulties of placing exclusive content arrangements on one's own networks, however, is that while it makes the TV, internet or wireless service more attractive to customers, it also risks harming the returns from the content by diminishing its audience size. Yet it is possible for companies to negotiate the balance.
Those multiple platforms are what's behind Quebecor's recent push into the wireless game. Montreal-based Quebecor, which is a dominating presence in the province's French-language media, acquired its current telecom division, Vidéotron Ltée., in 2000.
Quebecor president and chief executive officer Pierre Karl Péladeau and Robert Dépatie, who heads Vidéotron, built the dilapidated company into one of Quebec's premier telecom companies. On Thursday, Vidéotron turned on its wireless network and made wireless access to local and exclusive French-language content from TVA Group Inc. a key selling point of the venture.
In Quebec, Bell's main rival is Quebecor. Though CTV's predominantly English-language programming may not help it much there, it will like aid Bell's wireless and TV businesses in Ontario and Western Canada, particularly as Shaw prepares its own wireless network launch for some time in 2011.
Telus Corp., Shaw's main telecom rival in the west and a wireless competitor to Bell, has so far avoided buying content assets, though it has signed some arrangements, such as with the Canadian Football League. A merger between the Vancouver-based Telus and Bell, though, remains an option in the eyes of those who follow Canada's telecom sector. In that scenario, it would appear that Telus would not need to buy its own content assets.
A similar trend toward broadcasting-and-distribution conglomerates is playing out in the United States, where cable operator Comcast Corp. is making a play for control of the NBC Universal television and movie business. That deal, like Shaw's, is still working its way through the regulatory process.
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