CRTC APPROVES BCE PURCHASE WITH CONDITIONS

CRTC Release

The Canadian Radio-television and Telecommunications Commission (CRTC) today approved, subject to certain conditions, the purchase of BCE Inc.'s (BCE) broadcasting assets by a group that includes the Ontario Teachers' Pension Plan (Teachers') and three American private-equity firms, Providence Equity Partners L.P., Madison Dearborn Capital Partners L.P. and Merrill Lynch Global Partners Inc.

“The application under review proposed to privatize the country's largest communications company and included significant foreign interest,” said Konrad von Finckenstein, Q.C., Chairman of the CRTC. “Consistent with previous decisions, we have imposed conditions to address our concerns relating to corporate governance. These conditions will ensure that control of BCE remains in Canadian hands once the transaction is completed.”

The transaction will receive the Commission's approval if the conditions are met. In particular, the Commission is requiring the group of investors to ensure the following changes in the governance structure are made:

• the number of directors on the Board of Directors must be fixed at 13;
• Canadian investors must at all times nominate six directors on the Board, one more than non-Canadian investors, who may designate five;
• the Chairman of the Board must be Canadian and cannot be the Chief Executive Officer or a director nominated by a non-Canadian investor;
• a second Teachers' representative must sit on the Executive Committee of the Board;
• the Independent Programming Committee must consist of Canadians who are not affiliated with non-Canadian investors; and
• the threshold for veto rights must be raised to $110 million, approximately 5 per cent of the value of the broadcasting assets.

In addition, the Commission clarified that for purposes of determining effective control, it will only consider directors to be Canadian who are both Canadian by citizenship or residency and who are designated by Canadian shareholders.

The proposed arrangement between Teachers' and one of its former executives, P. Morgan McCague, was another area of concern for the Commission. Under the proposal, Mr. McCague will hold 66.7 per cent of the class A voting shares and exercise his voting privileges according to Teachers' directions, thereby allowing Teachers' to exercise control over the majority of the company's voting shares.

The CRTC accepted this arrangement only after being provided with a letter from the Financial Services Commission of Ontario stating that this structure does not contravene the province's prohibition against pension funds directly or indirectly investing in more than 30 per cent of the voting shares of a company.

In accordance with its tangible benefits policy, the Commission revised the value of BCE's applicable broadcasting assets from $109.6 million to $219.1 million, which increases the tangible benefits package to $21.9 million. As part of this package, the Commission has directed that $10.5 million be placed in a fund whose annual revenues will support new media initiatives.

The broadcasting assets involved in this transaction include Bell ExpressVu, cable assets in the province of Quebec and a minority stake in CTVglobemedia Inc.

Today's decision follows a public process that included a public hearing, which began on February 25, 2008.

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