Decision CRTC 99-152
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Ottawa, 23 June 1999
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Look Communications Inc. (formerly Look TV Inc. and Look Télé)
Barrie, Belleville, Brantford, Brockville, Chatham, Cobourg, Collingwood, Cornwall, Guelph, Hamilton, Kingston, Kitchener, Leamington, Lindsay, London, Midland, Orillia, Oshawa, Owen Sound, Peterborough, Port Hope, St. Catharines/Niagara, Sarnia/Clearwater, Simcoe, Stratford, Tillsonburg and Toronto, Ontario
Montréal and surrounding areas; Québec and surrounding areas including Saguenay/Lac St-Jean and surrounding areas, Quebec
Western Quebec and Eastern Ontario, including the National Capital Region
– 199809331 – 199809349
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Applications processed by Public Notice CRTC 1999-51 dated 25 March 1999
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Summary
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The Commission approves the applications by Look Communications Inc. (Look) for authority to effect a change in ownership by transferring Teleglobe Inc.’s (Teleglobe) controlling interest (58.52%) in Look to Telesystem Subco, a company to be incorporated (Telesystem Subco). This approval is subject to the condition that Look file an amendment to the by-law establishing an independent programming committee that will be responsible for making all programming decisions by Look. Specifically, the Commission requires the applicant to add the following section to Look’s proposed by-law:
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l) That the termination of the programming committee, or, any changes to the by-law governing the programming committee, be subject to the Commission’s prior approval.
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The amendment to the by-law will ensure that neither the parent company of Look nor its directors control the programming decisions of its licensee subsidiary.
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The Commission is satisfied that, as a result of the transaction approved herein, Look will remain eligible to hold a broadcasting licence in accordance with the requirements of the Direction to the CRTC (Ineligiblity of non-Canadians) (the Direction) P.C. 1997-486 as amended by P.C. 1998-1268.
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Background
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1. Teleglobe recently merged with Excel Communications Inc., a foreign company. As a result of this merger, Teleglobe is no longer a qualified corporation as defined in the Direction. The Direction requires, in the case of the parent corporation, that 66 2/3 % of the voting rights and voting shares be owned by Canadians. Teleglobe does not meet this requirement. Consequently, for the purpose of the Direction, Teleglobe is considered to be a non-Canadian company. In order to comply with the Direction, Look filed the present applications for authority to transfer all issued and outstanding shares that Teleglobe holds in Look to Telesystem Subco.
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Discussion
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2. As a result of the transaction approved herein, Look will be owned by several shareholders. Only Telesystem Subco will hold more than 20% of the voting shares. It will control Look with 58.52% of the voting shares of the licensee.
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3. For its part, Telesystem Subco will be owned and controlled by Telesystem Financial Corporation (Telesystem Financial) which will hold 66 2/3% of the issued and outstanding shares. Teleglobe will hold 33 1/3% of the issued and outstanding shares in Telesystem Subco, the maximum limit permitted by the Direction for a non-Canadian company.
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4. Telesystem Financial is controlled by Telesystem Ltd. The latter is ultimately controlled by Charles Sirois, a Canadian citizen and resident. Mr. Sirois is also Teleglobe’s Chairman and Chief Executive Officer. Telesystem Ltd. currently holds approximately 17.1% of the common shares of Teleglobe.
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5. Because of Teleglobe’s 33 1/3% participation, as a non-Canadian company, in Telesystem Subco, both it and Look must comply with the Direction’s requirement that the parent company or its directors not exercise control or influence over any programming decisions of the subsidiary corporation. In evaluating these applications, the Commission, therefore, examined the issue of whether Teleglobe would still be able to exercise control over Look.
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6. While Teleglobe will not have any direct voting interest in Look, it will be a voting shareholder in Telesystem Subco and will also hold non-voting shares in that company. The Commission notes that the non-voting shares may be converted into voting shares provided such conversion would not affect the status of the corporation as a qualified corporation as defined by the Direction. The Commission is satisfied that the Direction’s permitted limit on voting shares that can be held by a non-Canadian corporation will not allow Teleglobe to use its privilege to convert its non-voting shares into voting shares.
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7. Telesystem Subco's Board of Directors will consist of three members, two nominated by Telesystem Financial and one nominated by Teleglobe. As well, Telesystem Subco will nominate seven members to Look’s thirteen-member Board of Directors: four nominees will represent Telesystem Financial and three will represent Teleglobe. Consequently, Teleglobe will not nominate a majority of the directors.
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8. As part of the application process, the Commission raised concerns with the applicant that Look’s Unanimous Shareholders’ Agreement, as it currently reads, might allow Teleglobe to exercise control over Look. In response, the applicant confirmed that:
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· Teleglobe will transfer its rights and obligations under the Unanimous Shareholder’s Agreement to Telesystem Subco;
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· Upon closing of this transfer of shares, Telesystem Subco will assume Teleglobe’s place as Look’s controlling shareholder and will be bound by the terms of this agreement;
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· Teleglobe will no longer be a shareholder of Look and, consequently, will not be a party of the Unanimous Shareholders’ Agreement; and
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· the Unanimous Shareholders’ Agreement will remain in effect.
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9. Furthermore, in response to a request by the Commission, the applicant stated that it would be prepared to enact a by-law establishing an independent programming committee that will be responsible for making all programming decisions by Look.
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10. The financial consideration for the transfer is about $12.4 million. This approximates Telesystem Financial's pro-rated share of Teleglobe's direct and indirect investment to date in Look, including costs associated with management and personnel. Based on the evidence filed with the applications, the Commission has no concern with respect to the availability or adequacy of the required financing.
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The Commission’s decision
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11. The Commission is satisfied that, as a result of the ownership restructuring approved in this decision, Look will remain a qualified corporation as defined in the Direction and, therefore, continues to be eligible to hold a broadcasting licence. The Commission requires the applicant to file an amendment to its by-law establishing an independent programming committee by including the following section:
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l) That the termination of the programming committee, or, any changes to the by-law governing the programming committee, be subject to the Commission’s prior approval.
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Intervention
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12. In his opposing intervention, Mr. Arthur J.R.H. Neadow argued that Telesystem Subco's 58.52% holding in Look is not sufficient for the latter to remain a qualified corporation under the Direction if the remaining shareholders are not also qualified. Mr. Neadow also expressed concern that Teleglobe may convert its non-voting shares in Telesystem Subco to voting shares.
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13. The Commission notes that all of Look's other shareholders are qualified corporations except Le Groupe Québectel Inc., a non-Canadian corporation which will hold 4.7% of Look's common shares. More than 80% of Look's voting shares and voting rights will be held by Canadians. As noted earlier, the Direction's permitted limit on voting shares that can be held by a non-Canadian corporation would prevent Teleglobe from converting its non-voting shares into voting shares.
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14. In addition, Mr. Neadow asked why the applicant has not yet provided its multipoint distribution system (MDS) service to Kingston and eastern Ontario as authorized in Decisions CRTC 97-370 and 98-55, respectively. In response, the applicant stated that it "remains fully committed to providing comprehensive coverage throughout its licensed areas, including Kingston and eastern Ontario". The applicant further noted that its licence applications approved in 1997 and 1998 indicated that deployment of its MDS network was scheduled to proceed in a number of phases. It stated that it has completed the first three phases of the Ontario system and "looks forward to extending this service to the communities of Kingston and eastern Ontario." The Commission is satisfied with the applicant’s response.
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Related CRTC documents
- Decision CRTC 97-370: licensing of Look TV to serve to parts of Ontario, including Kingston
- Decision CRTC 98-55: licensing of Look Télé to serve western Quebec and eastern Ontario
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Secretary General
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This decision is to be appended to each licence. It is available in alternative format upon request, and may also be viewed at the following Internet site: www.crtc.gc.ca
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