08/16/2012 12:45 EDT | Updated 10/16/2012 05:12 EDT

3 CEOs opposed to Bell-Astral deal complain to Heritage minister about agencies

MONTREAL - The CEOs of three major Canadian multimedia companies have written to the minister of Canadian Heritage, complaining that two federally funded agencies have gotten involved in the $3.4-billion Bell-Astral deal.

They say it's inappropriate for a local RCMP detachment in Terrace, B.C., and for Telefilm Canada to have made submissions to the CRTC in favour of a deal they oppose.

The heads of Cogeco Cable Inc. (TSX:CCA), Eastlink, and Quebecor Inc. (TSX:QBR.B) say they're concerned about the independence of other federal agencies reviewing the transaction — the CRTC and Competition Bureau.

The CEOs say the RCMP and Telefilm Canada are funded by tax dollars and have asked Heritage Minister James Moore to have their letters withdrawn.

"We were surprised to find out that among the 1,700+ interventions received by the CRTC on the BCE/Astral applications, two are from federal agencies whose interventions in this matter go beyond their respective competence and mandate," they wrote in a letter to Minister Moore.

"In our view, these federal public bodies should have known better than to take sides on this public policy debate before the federal regulators in charge of reviewing the proposed merger."

They accuse Bell of lobbying the federal bodies and have asked that the Commissioner of Lobbying investigate the matter.

Cogeco, Eastlink and Quebecor, which compete against BCE Inc's Bell (TSX:BCE) and Astral Media (TSX:ACM.A), launched a high-profile campaign last week against the transaction. Telus Corp. (TSX:T) voiced similar concerns on Monday.

Telus said Bell could have a 49.5 per cent share of the English-language television audience with its purchase of Montreal-based Astral, along with its ownership in the Maple Leaf Sports and Entertainment TV assets, and its stake in joint venture assets such as Teletoon. The consortium pegs the figure at 37.6 per cent.

However, Bell (TSX:BCE) said they have both over-estimated the potential English language audience with the inclusion of the MLSE TV assets — including Leafs TV, NBA and soccer channels — and put it at 33.5 per cent instead of almost half.

The CRTC approved the sale of the sports television channels Thursday, saying it has been convinced that the deal will benefit Canadians and lead to the creation of new home-grown sports programming.

Astral (TSX:ACM.A) owns radio stations as well as specialty channels and pay-TV networks, including The Movie Network and HBO Canada.

BCE has said it expects the deal will be completed in the second half of the year.

Bell has proposed tangible benefits valued at $200 million to help support the country's broadcasting industry in its effort to obtain the federal broadcast regulator's approval for the Astral deal. The payment of tangible benefits is a condition of CRTC approval.

The company has also said it will need to sell 10 radio stations in five markets —Toronto, Vancouver, Calgary, Ottawa-Gatineau and Winnipeg — to get the green light from the CRTC.

The proposed benefits package includes $96 million for the development and production of Canadian programming and $61 million to help support, promote and develop Canadian musical talent and to assist community radio and other initiatives.

The deal also includes $40 million to help make Canadian programming more widely available in the North through the extension of new broadband services, and $3.5 million to raise money and awareness to help combat mental health issues.

Bell had to make a similar offer when it bought CTVglobemedia in 2011. Part of that deal included $5.7 million for an independent Broadcasting Accessibility Fund.