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Decision
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Ottawa, 13 February 1984
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Decision CRTC 84-104
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Halifax Cablevision Limited, Halifax, Nova Scotia - 832493100
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Following a Public Hearing in Hull, Quebec on 15 November 1983, the Canadian Radio-television and Telecommunications Commission announces that it denies the application for authority to transfer effective control of Halifax Cablevision Limited (Halifax Cablevision), licensee of the broadcasting receiving undertaking serving Halifax and surrounding areas, through the transfer of 2,750 common and 2,750 preferred shares (55%), from Senator A. Irvine Barrow (2,250 common and 2,250 preferred shares), J. Keith Lawton (250 common and 250 preferred shares) and Donald D. Anderson (250 common and 250 preferred shares), to Eastern Cablevision Limited (1,375 common and 1,375 preferred shares) and to John L. Bragg on behalf of a company to be incorporated (1,375 common and 1,375 preferred shares).
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The shares to be held by the company to be incorporated by Mr. John L. Bragg and those to be held by Eastern Cablevision Limited were to be voted as a control block as stated in a letter of intent submitted by the purchasers.
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Eastern Cablevision Limited is owned 97% by Eastern Services Limited, which company, in turn, is owned 50% by Stuart P. Rath, President and General Manager of Eastern Cablevision Limited, the cable television licensee serving Truro and Parrsboro, Nova Scotia.
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The company to be incorporated by Mr. John L. Bragg would be indirectly controlled by John L. Bragg and R. Douglas Bragg. John L. Bragg and R. Douglas Bragg each own 50% of the following cable television licensees: Central Cable Television Limited, serving Amherst, Lunenburg and Bridgewater, Nova Scotia; Springhill Cable TV Limited, serving Springhill, Nova Scotia; Sackville Cable TV Limited, serving Sackville, New Brunswick; Antigonish Cablevision Limited, serving Antigonish, Nova Scotia and MidValley Cablevision Limited, serving Kingston, Nova Scotia.
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The Bragg-Rath interests as set out above represent a significant cable television group in the Atlantic Region, particularly in Nova Scotia. This group now serves 15% of all cable subscribers in Nova Scotia and the addition of Halifax Cablevision, Nova Scotia's largest system, would increase that to 44%.
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At the public hearing, the purchasers claimed that certain benefits would accrue as a result of the proposed transaction. These include leadership by Halifax Cablevision in the cable television industry in Nova Scotia, particularly in the areas of marketing and research, upgrading of the channel capacity of Halifax Cablevision from 27 to 35 channels and cost-sharing in terms of marketing, technical equipment and personnel development.
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Having considered the existing financial and human resources of Halifax Cablevision, the Commission considers that these benefits, particularly those relating to leadership, marketing and research, could be and should be substantially realized by Halifax Cablevision without the proposed transaction taking place.
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With respect to the proposed purchasers' endorsement of the upgrading of the Halifax system by expanding its channel capacity from 27 to 35 channels, the Commission notes that such upgrading was initiated by the licensee in 1982 and that it should be completed by September of this year.
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While the Commission notes that most of the smaller systems owned by the proposed purchasers require significant technical upgrading and expansion of their channel capacity, it also notes that these undertakings are financed to a very large extent by debt and, as the applicants admitted at the hearing, that:
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This debt load will be carried by the other cable systems and Oxford Frozen Foods, supported by our guarantees and the guarantees of our other companies.
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Furthermore, the purchasers indicated they were not prepared to make capital expenditures at this time "until it is necessary to make them" and submitted no specific plans in this regard.
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Based on the financial projections submitted in connection with this application, there is no evidence that capital expenditures for Antigonish Cablevision Limited, Central Cable Television Limited and Sackville Cable TV Limited are projected for the next twelve years.
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According to the purchasers, sizeable projected dividend payments by Halifax Cablevision would be made necessary to finance the purchase and would represent in excess of 60% of the total cash flow of the Company over the ten-year term of the debt associated with the proposed transaction.
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Although the Commission has found in the past that positive benefits can sometimes be derived from increased concentration in the cable industry, in this case, based on the financial arrangements proposed, the Commission finds that there are no benefits to be derived from the proposed transaction either for the communities or the subscribers concerned. Furthermore, approval of the transaction may restrict the ability of the smaller systems to provide an adequate quality of service to their subscribers and make necessary technical improvements.
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The Commission considers that these smaller cable systems would be better served by a vigorous upgrading and a consistent asset replacement plan than by the acquisition of control of Halifax Cablevision.
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The Commission acknowledges the intervention by the Star Channel Services Limited in support of this application.
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With respect to the intervention by Dartmouth Cable TV Limited and the 45% minority ownership interest held by this company in Halifax Cablevision, the Commission acknowledges the concern raised with respect to the absence of representation from Dartmouth Cable TV Limited on the Board of Directors of Halifax Cablevision.
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J.G. Patenaude
Secretary General
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