By Alastair Sharp
TORONTO (Reuters) - Canada's Competition Bureau has approved BCE Inc's plan to acquire Astral Media Inc for C$3 billion ($2.9 billion), but the Bell parent's offer to buy the media company must still pass muster with the telecommunications regulator.
The competition watchdog said on Monday its approval carried the condition that BCE, a growing broadcaster, must sell some of Astral's pay and specialty television channels, including several Disney channels.
In addition, the bureau said BCE must not impose "restrictive bundling requirements" on any rival provider seeking to carry Astral's flagship movie channels in either English or French.
"It is starting to look more like the breakup of Astral rather than a simple merger with Bell," said Michael Geist, an University of Ottawa academic focused on law and technology. "The bigger question of whether this transaction meets the public interest test at the CRTC remains an open question."
Critics, including BCE's rivals, had complained that an enlarged BCE would use its clout as a content owner to push costs higher across the industry or promote exclusive content over its television and Internet services to poach subscribers.
In a deal that closed in 2011, BCE bought CTV, Canada's largest private broadcaster, giving it leading news and sports channels.
BCE will retain eight Astral TV services, all in French except The Movie Network, it said in a separate statement.
It said Corus Entertainment Inc would buy Astral's share of six television joint ventures as well as two radio stations for C$400.6 million, and that a process is under way to sell more assets.
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The Canadian Radio-television and Telecommunications Commission rejected BCE's first offer for Astral in October, citing the inordinate influence it would give BCE.
The commission is expected to reveal details of BCE's subsequent offer this week, when it sets a date for public hearings.
"I believe the decision today and how the transaction is being presented and how many TV stations are being sold, it does add some probability to a positive outcome at the CRTC level," said Maher Yaghi, an analyst at Desjardins Securities, on BNN Television. "But nothing is sure until it's done."
BCE's retention of many of Astral's Francophone assets will likely challenge Quebecor Inc's dominance of French-language content.
"That landscape will have changed quite dramatically for the benefit of viewers there," Mirko Bibic, BCE's head of regulatory affairs, said in a phone interview.
Its divestiture of a string of English-language channels, conversely, should work in the favor of rivals such as Rogers Communications Inc.
As part of its initial bid, BCE had already agreed to sell some of Astral's radio stations so that the combined company would not exceed the maximum number of stations a single company is allowed to own in any geographical market.
BCE said the retained TV channels and radio stations plus Astral's outside advertising business provided 77 percent of the target's earnings before interest, taxes, depreciation and amortization.
(Additional reporting by Randall Palmer, Louise Egan and David Ljunggren in Ottawa; Editing by Frank McGurty, Peter Galloway and David Gregorio)