**updated with the latest reports from Harper government
BCE (TSE:BCE) late Thursday announced it will request that the federal Cabinet intervene in the Canadian Radio-television and Telecommunications Commission's (CRTC) decision to reject Bell's acquisition of Astral Media (TSE:ACM.A).
But according to reports, a spokesman from the Harper government said the cabinet has no legal ability to overturn this decision. The government’s response means the Federal Court of Appeal is the only option left for BCE.
Shares of Astral tumbled over 15 per cent Friday on the CRTC’s unexpected decision, while shares of Bell were also lower by 1.7 per cent.
In a statement on its website, the CRTC denied BCE’s application to acquire control of Astral Media’s television and radio services, saying it is not in the public interest, and that it would create a situation where BCE would be able to exert market power unfairly.
Astral Media operates 84 radio stations and 20 pay and specialty television channels in both official languages.
“BCE failed to persuade us that the deal would benefit Canadians,” said CRTC chairman Jean-Pierre Blais in a release on the site.
“It would have placed significant market power in the hands of one of the country’s largest media companies. We could not have ensured a robust Canadian broadcasting system without imposing extensive and intrusive safeguards, which would have been to the detriment of the entire industry.”
Telecom giant BCE is Canada's largest telecoms company with its Bell and Bell Aliant brands as well as its Bell Media broadcasting unit, which owns CTV, Canada's second-biggest public broadcaster.
Earlier this year, it struck a $3.38 billion deal to acquire Astral. It was a deal that in May received 99.84 per cent approval from Astral’s shareholders across all share classes, Astral said.
The acquisition was even approved by the Quebec Superior Court and was expected to be completed in the second half of this year.
In a statement released late Thursday, Bell said it is “appalled that the CRTC would come to a decision that so negatively impacts Canadian consumers and the national broadcast industry”.
The company went on to say that the decision contravenes the CRTC’s own policy and is “tainted by behind-the-scenes lobbying” by Bell's cable rivals.
Bell's chief legal and regulatory officer, Mirko Bibic, said:"Considering the dire impact the CRTC's decision will have on consumers in communities small and large, the blow it delivers to confidence in Canada's regulatory system, and the fact that the CRTC worked so closely with cable companies to arrive at its conclusions, Bell is compelled to launch its request to the federal Cabinet to direct the CRTC to actually follow its own in-place policy.”
Many of Bell’s rivals opposed the deal at the CRTC hearing last month, with some citing concerns over “unhealthy competition”.
The CRTC agreed Thursday, noting that the proposed transaction “raised substantial concerns related to healthy competition, the concentration of ownership in the television and radio markets, vertical integration and the exercise of market power in an anti-competitive manner”.
The regulator went on to say that BCE already controls numerous television and radio services, as well as a national broadcasting distribution service.
“It is the largest Internet service provider in Canada, the second largest wireless service provider and the third largest television distributor,” said the CRTC.
The CRTC also denied BCE’s application to convert CKGM Montréal from an English to a French-language station.
The decision follows a public proceeding, which included a public hearing held in September.
If the CRTC's decision stands, one of the closing conditions for Bell's $3.38 billion acquisition of Astral Media will not be met and the transaction will not proceed. The transaction also remains subject to approval by the federal Competition Bureau.