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Decision
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Ottawa, 25 November 1987
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Decision CRTC 87-889
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Saskatoon Telecable Ltd.
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Calmar, Castor, Elk Point, Evansburg/Entwistle, Falher, Forestburg, Killam, Mannvile, Mayerthorpe, Provost, St. Albert, Sedgewick, Tofield, Two Hills, Valleyview, Alberta; Allan, Big River, Bruno, Cudworth, Cupar, Dalmeny, Delisle, Kerrobert, Macklin, Prince Albert, Saskatoon, Spiritwood, Strasbourg, Saskatchewan; Langley, British Columbia - 871250700 - 871251500 - 871257200 - 871258000 - 871259800 - 871260600 - 871262200 - 871263000 - 871264800 - 871268900 - 872975800 - 871271300 - 871274700 - 871280400 - 871281200 - 871244000 - 871245700 - 871247300 - 871252300 - 871253100 - 871255600 - 871254900 - 871261400 - 871265500 - 871267100 - 871270500 - 872973300 - 871273900 - 871277000 - 872974100
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Following a Public Hearing in Winnipeg, Manitoba on 1 September 1987 and pursuant to Public Notice CRTC 1987-216 dated 25 September 1987, the Commission approves the application for authority to transfer effective control of Saskatoon Telecable Ltd. (Saskatoon Telecable) to 581631 Saskatchewan Ltd. (581631), a company owned and controlled by Mr. Clinton Forster, an existing shareholder of the licensee company.
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The transaction will be effected through the transfer of 7,134 common shares (rather than 7,210 as stated in Notice of Public Hearing CRTC 1987-60) and 330,750 Class "B" preferred shares, from existing shareholders to 581631. The purchase price of the common shares involves a combination of cash and preferred shares for each unit of 3 common shares held so that the vendor receives $600 per share for the first two shares and $600 aggregate par value of 8 preferred shares for the third common share held. The Class B preferred shares issued and outstanding in Saskatoon Telecable will be purchased for $1.00 each by 581631.
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Saskatoon Telecable is the licensee of broadcasting receiving undertakings serving fourteen communities in Alberta and thirteen in Saskatchewan. In addition, it owns 100% of the shares of Western World Communications Ltd., licensee of CJWW Saskatoon, Saskatchewan; 72% of the shares in City and Country Radio Ltd., licensee of CJUP Langley, British Columbia; and 33% of Balsa Broadcasting Limited Partnership, licensee of CKST St. Albert, Alberta.
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As a result of this transaction, the common shares of Saskatoon Telecable held directly by Mr. Forster and his family will amount to approximately 25%; the remaining 75% being held by Mr. Forster's company, 581631. The Commission notes that immediately following this transaction. Saskatoon Telecable intends to amalgamate with 581631. This will result in the Forster family holding 100% of the common shares of the amalgamated company which will retain the name Saskatoon Telecable Ltd.
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New Class "B" preferred shares (19,016) that will be issued as part of the consideration for the purchase of the common shares of Saskatoon Telecable and these preferred shares will become preferred shares of the amalgamated company. The preferred shares have a fixed redemption value of $75 and are to be paid a 35% dividend at the end of the fifth year and a 7% dividend at the end of the sixth year. However, should the licensee default on the redemption or payment of dividends, the preferred shares are to become voting shares and are entitled to one (1) vote.
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The Commission reminds the licensee that prior approval of the Commission is required with respect to any act, agreement or transaction that will directly or indirectly result in a change of, or materially affect, the ownership or effective control of the licensee. Accordingly, before the voting rights of the preferred shareholders of the amalgamated company are acted on, an application to the Commission in this regard would be required.
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The Commission has examined the financial elements of the transaction and is satisfied that there are no concerns with respect to the availability or adequacy of the required financing.
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As stated in a number of decisions relating to applications for authority to transfer effective control of licensee companies, and because the Commission does not solicit applications for such transfers, the onus is on the applicant to demonstrate to the Commission that the application filed is the best possible proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
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In evaluating the benefits to be derived from this transaction, consistent with its criteria for assessing applications involving changes in ownership, the Commission has taken into account that this is an intra-corporate transaction which will result in an existing shareholder buying out other minority shareholders and thereby gaining effective control of the licensee company. Accordingly, the Commission has placed significant emphasis on those benefits which may not be quantifiable in monetary terms.
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In light of this, the Commission has attached particular importance to the leadership role that Mr. Forster has maintained in the management of the company since the founding of Saskatoon Telecable in 1972 and to the continuity and stability of management which will be maintained through this transaction. It notes that Mr. Forster is the Founder, President and General Manager of the licensee company.
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While Mr. Forster indicated that there will be no "significant changes in the policies or operations of the company", he undertook to implement significant improvements in the area of community programming services and to implement specific technical improvements to the cable system serving Saskatoon.
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With respect to the commitments related to community programming, Mr. Forster proposes to invest, in addition to current commitments, $150,000 in equipment and facilities over the next three years to upgrade, expand and augment the existing facilities. In view of the importance that the Commission attaches to the development of community programming and taking into account Mr. Forster's plans in this regard. Saskatoon Telecable is expected to submit, within 3 months of the date of this decision, a comprehensive report providing a breakdown of the allocation of the above-noted figure and a schedule indicating the proposed time-table for each expenditure therein outlined.
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In addition, M. Forster made a commitment to increase the annual operating budget for community programming by 10% in each of the next three years, in order to hire additional community programming personnel.
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With respect to the commitment to effect improvements to system quality and service, the Commission notes that $2,400,000 has been allocated over the next three years to expand the capacity of the broadcasting receiving undertaking serving Saskatoon from 20 to 36 channels. Mr. Forster has indicated that Saskatoon Telecable's other broadcasting receiving undertakings already have sufficient channel capacity to accommodate new services over the next five to ten-year period. Although the Commission does not consider this to be a tangible benefit due to the fact that partial recovery of the cost of this initiative may be gained through future rate increases pursuant to Section 18(6) of the Cable Television Regulations, 1986 (the regulations), it acknowledges that such an improvement will enhance the service currently provided to the licensee's Saskatoon subscribers.
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In addition to the above-noted commitment, Mr. Forster further submitted that he has undertaken to extend the authorized service area of the Saskatoon system to incorporate new city subdivisions and to add new satellite services.
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The Commission has taken note of the statement made by Saskatoon Telecable "that no rate increase application will be filed as a direct consequence of this transfer. The purchase of the shares in question will be financed through the general operations of the company. It is expected that subsequent rate increases will relate to cost of living increase provisions and/or requirements related to the up-grading of the Saskatoon system to permit the carriage of additional services."
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In relation to the foregoing, the Commission reiterates its long-standing policy that subscribers should not be required to pay higher fees merely because the ownership or control of a cable television system has changed hands and, as such, the Commission views Saskatoon Telecable's stated assurances to its subscribers in this regard as being particularly important.
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As stated, in its assessment of this application the Commission has placed particular emphasis on benefits of an intangible nature, namely those resulting from the consolidation of the ownership of the licensee company. The Commission considers that the stability, continuity and growth that is expected to flow from such a consolidation will result in an overall enhancement of the services provided by Saskatoon Telecable. It is also satisfied that based on the past record of Mr. Forster, the founder and still President of the licensee, the proposed transfer is in the public interest.
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In light of the statements made at the public hearing and having examined the application as submitted, the Commission has concluded that the benefits so the communities served are commensurate with the size of the transaction, the viability of the undertaking, the responsibilities involved and the resources available to the applicant.
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Fernand Bélisle Secretary General
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