Could Netflix hold the key for BCE/Astral merger?

by Andrew Roach on May 7, 2013

It’s one of the longest takeover sagas in Canada but it seems that BCE and Astral are still determined to get the merger completed between the two media giants.

The latest twist in the saga is that both firms believe that their merger is just what traditional communication firms need to help take on the booming digital firms such as Netflix.

The news comes at the start of a hearing held by the CRTC to see whether the planned acquisition of Astral would be fair to competition in the Canadian telecom industry.

For the last few months, BCE has been trying to buy Montreal-based Astral for an estimated $3.4bn but has seen its previous attempts blocked by the CRTC.

At the hearing, one of the main themes that the two firms wanted to make clear is that there was a threat to the traditional telecommunications market.

Astral’s executives were keen to make it clear that companies such as themselves were unable to compete against the resources of larger Internet based firms such as Netflix without the backing of an industry powerhouse like BCE.

Over the past year or so, online services such as Netflix have gained considerable popularity doubling their subscriber base to 2 million customers in Canada.

Whilst 12 million people still receive satellite and cable products, the growing demand for streaming services has put many traditional communication providers under increasing pressure in the last year or two..

These feelings have been channelled by Astral Chief Executive Ian Greenberg who made clear the struggles that his company were facing. During the hearing, he said that “Netflix is just one prominent example of the kind of scale being brought to bear on Canada’s industry – challenges to our business that we believe we must meet head-on by expanding our own scope and scale. That is what this transaction enables”.

Both firms will be hoping that at the end of the hearing, the CRTC will finally allow the takeover to go through between the two firms.

With BCE already being the second largest telecommunications company in Canada, there has been concern from industry rivals about the advantage the firm would get if they took over Astral.

Both parties will have until Friday to convince industry regulators that the move is going to be beneficial for consumers in the long run.

The end verdict of the hearing will ultimately seal the fate of one of the biggest takeovers in the history of the Canadian communication industry and could ultimately signal whether traditional companies have a chance to compete against their digital rivals.

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