ARCHIVED - Decision CRTC 2001-689

Decision CRTC 2001-689

Ottawa, 9 November 2001

NewCap Inc.
Sudbury, Ontario 2001-0543-8

10 September 2001 Public Hearing
National Capital Region

Acquistion of the assets of CHNO-FM

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.

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.

Timing of the transaction

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.

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.

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.

Benefits

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:

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.

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).

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.

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.

14.

The Commission notes that the commitments proposed as benefits are over and above CHNO-FM's existing commitments and conditions of licence.

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.

Related CRTC documents

Secretary General

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: www.crtc.gc.ca