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Exteriors of Air Canada Centre and the entrance to Maple Leaf Sports and Entertainment which is located there.Fred Lum/The Globe and Mail

Canada's two largest telecommunications firms teamed up on a last-ditch effort in recent weeks to buy Maple Leaf Sports and Entertainment Ltd., but disagreements between BCE Inc. and Rogers Communications Inc. dissolved the alliance and killed the deal.

The blue-chip Canadian companies were prepared to pay between $1.3-billion and $1.4-billion for the Ontario Teachers' Pension Plan's 79.5-per-cent stake in MLSE, and would have split the price down the middle. But they had a hard time working together, especially when it came to dividing up the prized broadcast and Internet rights that they were after, and their talks dissolved.

Teachers' confirmed Friday that it had pulled the plug on its auction process. The pension plan had never been very eager to part with MLSE, a franchise that can't help but pull in stellar profits regardless of whether the Leafs, its marquee team, wins or loses on the ice.

The failure by BCE and Rogers to agree on a joint bid highlights the degree of tension between the two telecommunications and media giants, who had been involved in a months-long dance to gauge each others' interest. For the companies, the stakes were high: The franchise's TV rights would give them domain over some of Canada's most lucrative sports broadcast content.

Neither firm wanted to gamble on a hefty takeover of MLSE, but neither firm was willing to risk letting the valuable assets go to their rival. The inevitable result was that the two companies began discussing a joint bid.

The talks took place between the most senior officials at each firm, including chief executive George Cope at BCE, and Rogers' CEO Nadir Mohamed and CFO Bill Linton.

During the last month, those talks became serious, but the companies were unable to resolve their differences. They knew that even if they could, they faced another hurdle: Winning over construction magnate Larry Tanenbaum, owner of the remaining 20.5 per cent of MLSE. Dividing up the broadcast and Internet assets would require his approval in order to change MLSE's shareholders' rights agreement.

The deal's failure also highlights difficulty of attracting private equity buyers to a marquee asset in a struggling global economy.

When Teachers' kicked off the auction this spring, the valuations that were being ascribed to companies were rising, with the return of credit and liquidity to the markets stoking bidding wars.

A number of private equity firms, still relatively flush with cash to deploy despite the financial crisis, took a look at MLSE. The pension plan decided in March of this year to hire bankers after it received unsolicited expressions of interest from potential acquirers.

Teachers' is believed to have had an unofficial asking price of about $1.8-billion, and said from the start it would hold onto its stake if bids didn't meet expectations.

Deal markets have soured as a result of the European sovereign debt crisis, and large acquisitions have become riskier for private equity firms and other potential bidders.

And the Leafs' prospects have become sweeter – they have a shot at the playoffs for the first time since 2004. Teachers' appetite to sell has waned even further because of the extra revenue it could earn from the playoffs.

One of the traditional gripes about the Leafs has been that the owners don't care if the team wins because the Air Canada Centre is full every night no matter how bad the team does.

Already, the Leafs have the highest ticket price in the league at $123.77 (U.S.), according to the research site Team Marketing Report. Add in all the other costs of attending a game at the MLSE-owned Air Canada Centre and the Leafs extract more money from fans than any other team in the NHL. According to the Fan Cost Index, prepared by Team Marketing Report, the cost of four non-premium tickets, two small draft beers, four small soft drinks, four hot dogs, parking, and a couple of programs and caps would cost $622.08, almost twice the league average.

But teams that make the playoffs provide huge boosts in profits to their owners, because players are not paid more to play in the playoffs. That means that all revenue the Leafs would get from playoff tickets, beer and popcorn sales and extra merchandise sales would fall almost straight to the bottom line. For MLSE, having the Leafs back in the playoffs would be a big win financially.

Teachers' now intends to embark on a strategy that it hopes will further improve the Leafs' performance, and at the same time add to MLSE's profitability, sources said.