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Decision CRTC 2001-689
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Ottawa, 9 November 2001
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NewCap Inc.
Sudbury, Ontario 2001-0543-8
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10 September 2001 Public Hearing
National Capital Region
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Acquistion of the assets of CHNO-FM
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1. |
The Commission approves the application for authority to
acquire the assets of radio programming undertaking CHNO-FM Sudbury
from Haliburton Broadcasting Group Inc. (Haliburton), and for a
broadcasting licence to continue the operation of this undertaking. |
2. |
Upon surrender of the current licence, the Commission will issue
a licence to NewCap Inc. expiring 31 August 2005, the current
expiry date. The licence will be subject to the conditions set out
in this decision, and those set out in Public Notice CRTC 1999-137.
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3. |
The total consideration relative to this transaction is
$2,843,000. Based on the evidence filed with the application, the
Commission has no concerns with respect to the availability or the
adequacy of the required financing. |
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Timing of the transaction
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4. |
The Commission notes that, in Decision CRTC 99-404 dated 31
August 1999, it approved applications by Haliburton to purchase four
radio stations for a total price of $250,000. One of the stations
included in the purchase was CHNO, which the licensee then converted
to an FM station. As noted above, CHNO-FM is now being sold
separately for over $2.8 million.
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5. |
Given the significant gain resulting from this transaction and
the short time that Haliburton held the licences for CHNO and,
subsequently, CHNO-FM, the Commission questioned the licensee about
whether or not the current transaction constituted licence
trafficking. In reply, Haliburton noted that it had paid start up
costs and covered operating losses for two years on the station that
were in excess of $650,000. It further indicated that it planned to
use the proceeds from the sale to purchase CKLP-FM Parry Sound.
Haliburton indicated that the purchase price for CKLP-FM, as well as
benefits related to Canadian talent development (CTD) and necessary
technical upgrades to the station, would be in excess of
$2.2 million. The Commission has approved Haliburton's
acquisition of CKLP-FM in Decision CRTC 2001-691, issued today.
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6. |
The Commission notes that radio broadcasting involves the use of
public frequencies. Licences to operate such undertakings are
obtained following a public, and often competitive, process. Those
with broadcasting licences should use them first and foremost to
provide service to the public. Such licences should not be acquired
primarly for investment purposes. The Commission is therefore
concerned when parties acquire broadcasting undertakings, sell them
after a short period of time and receive significant financial gain
from the transaction. In this case, Haliburton applied for and
received approval to purchase CHNO and carry on the business of that
radio undertaking. It is now selling the assets of this station just
two years later at significant profit. |
7. |
However, in light of the information provided by the applicant,
the Commission is willing to consider this situation as a special
case. It notes that the Haliburton will use the proceeds from the
transaction to acquire another radio station. The profits from the
transaction will therefore remain within the broadcasting system.
The benefits from the current transaction, as well as the one
Haliburton is concluding in Parry Sound, will serve to increase
funds for Canadian talent development and thus enrich the Canadian
broadcasting system. |
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Benefits
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8. |
Under the Commercial Radio Policy 1998 (Public Notice CRTC
1998-41), those purchasing profitable radio stations are expected to
propose a minimum direct financial contribution to CTD of 6% of the
value of the transaction. The contribution should be allocated as
follows: |
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· 3% to new Canadian
promotion and marketing funds (the Radio Starmaker Fund and Fonds
Radiostar |
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· 2% to FACTOR; and |
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· 1% to other Canadian
talent development initiatives. |
9. |
In accordance with the policy, NewCap has proposed a total
contribution to CTD of $170,580, which is 6% of the purchase price.
$85,290 (3% of the purchase price) will be paid to the Radio
Starmaker Fund/Fonds Radiostar, and $56,860 (2% of the purchase
price) will be paid to FACTOR.
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10. |
The applicant, however, proposed to contribute the remaining 1%
($28 430) required under the benefits policy to Aboriginal Voices
Radio (AVR) rather than directly to CTD. The Commission has recently
awarded licences to AVR for new FM stations in Toronto, Vancouver,
Calgary and Ottawa. In support of its proposal, NewCap indicated
that it considered the proposed contribution to AVR would be of
benefit to the broadcasting system. It also noted that the
Commission approved a contribution to Aboriginal radio as a CTD
initiative in an application by Atlantic Stereo Limited for a new
radio station to serve Moncton, New Brunswick (Decision
CRTC 2000-360).
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11. |
NewCap indicated, however, that if the Commission did not
consider that its proposed contribution to AVR was acceptable under
the benefits policy, it would redirect the 1% contribution to
support a local Sudbury initiative related to CTD. |
12. |
The Commission considers that the proposed support for Aboriginal
Voices Radio would contribute to the fulfilment of section 3(1)(o)
of the Broadcasting Act which stipulates that programming
reflecting the aboriginal cultures of Canada should be provided
within the Canadian broadcasting system as resources become
available. Thus the Commission considers that NewCap’s support for
AVR will be beneficial to the broadcasting system as a whole and approves
the proposal.
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13. |
The Commission notes, however, that the purpose of the benefits
requirements for commercial radio stations is to promote and support
Canadian musical and other artistic talent through contributions to
third parties. The Commission therefore requires NewCap to
submit, within 60 days of the date of this decision, a report
setting out how the funding provided to AVR will be used to support
and promote Canadian and Aboriginal talent.
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14. |
The Commission notes that the commitments proposed as benefits
are over and above CHNO-FM’s existing commitments and conditions
of licence. |
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Other matters |
15. |
The Commission notes that this licensee is subject to the Employment
Equity Act and therefore files reports concerning employment
equity with Human Resources Development Canada. |
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Related CRTC documents |
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§ Decision 2001-691 – Acquisition
of the assets of CKLP-FM by Haliburton |
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• Public Notice 1999-137
– New licence form for commercial radio stations |
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• Public Notice 1998-41 –
Commercial radio policy 1998 |
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Secretary General
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This decision is to be appended to the licence.It is available in
alternative format upon request, and may also be examined at the
following Internet site: http://www.crtc.gc.ca
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