The BCE / CTV decision from the CRTC reveals the importance of full disclosure in regulatory proceedings.
Broadcasting Decision CRTC 2011-163 received a lot of attention because of the interest in Canada’s increased level of vertical integration, which will be the subject of a hearing in June.
There are a couple lines in the BCE / CTV Decision that merit mention because they indicate the benefits of full disclosure when asked by the CRTC to produce evidence.
During the oral hearing, the CRTC asked for the financial model [around line 399 of the transcript] used by PwC in developing the valuation of the transaction. PwC said that the model was its intellectual property and that it does not normally release the spreadsheet:
It’s policy at PWC that we do not distribute the actual financial models that we prepare as part of our valuation work unless it is explicitly contemplated that provision of the model is part of our engagement.
The model was used to allocate the purchase price between TV and radio, which is important, since TV attracts a 10% “tangible public benefit” and radio only attracts 6%. Since the model was said to have a 10% range of accuracy, the CRTC adjusted the allocation by that tolerance, shifting more than $32M from radio to TV. The four percentage point differential appears to have resulted in about $1.25M in additional tangible benefits being allocated.
It leads one to wonder if it would have been less costly to adjust PwC’s engagement to permit sharing the model with the CRTC.