Bell Receives CRTC Approval on Takeover of Astral Media

It has been announced today that Bell (TSX: BCE) has received approval on their takeover offer of Astral Media by the CRTC (Canadian Radio-television and Telecommunications Commission). The CRTC is, ultimately, the watchdog for the Canadian media industry. It is responsible for ensuring fairness and competition among the various media participants including, among others, big name players such as Rogers (TSX: RCI.B) and Cogeco (TSX: CCA).

As part of this takeover, Bell would be acquiring some of the television channels and radio networks currently owned by Astral Media. This deal, for a ballpark sum of $3 billion, would move Bell’s share of the French-language television market to 22.6%, while enjoying a 35.8% share of the English-language market, as per the CRTC (http://crtc.gc.ca/eng/com100/2013/r130627.htm). The Commission assures Canadians that this will still allow for a competitive landscape and not impede the interests of consumers (the little ones, like you and me).

If there is one thing we can learn by looking through the history of large industry consolidations and/or mergers, however, we find that they do not often result in a sweetened deal for the little guy. Of course, the CRTC approval does include some conditions which will restrict any monopolizing agendas by Bell and, fortunately, require them to also invest in Canadian-specific content and youth initiatives.

Once the dust settles on this deal and Bell has integrated Astral, I expect this to be a value-adding proposition. Gaining such a considerable share of the market will allow Bell to have greater control over their content and essentially broaden their media asset portfolio.

What does all of this mean to the astute dividend investor? A more secure income stream as Bell will have more assets to rely on to smooth revenues and assist in growth. It will also lessen Bell’s exposure to wireless where it already competes heavily with Rogers and Telus (TSX: T). My hope as an investor is that this will be accretive to Bell’s earnings from the get-go and spur further dividend growth down the line.

I am encouraged by Bell’s ability to put large sums of cash to work in this environment where companies have been sitting on the sidelines waiting for more political and economic certainty. In an age where companies often perform takeovers in unrelated industries for the sake of growth itself, I believe this deal actually makes a lot of sense.

Full Disclosure: Long BCE.