Source: iStockAnalyst

TORONTO, Feb.1 (Xinhua) -- The Canadian media hopes its fortunes take a turn for the better this year, after 2009's firestorm that saw the collapse of the country's leading broadcaster and newspaper publisher.

Canwest, a company that owns a chain of once-lucrative newspapers in most of Canada's largest cities, several weekly newspapers, a television network, specialty cable TV channels, magazines and the web portal Canada.com, is being broken up after a failed experiment with media convergence.

Possible or not, Canwest hopes that its television network and newspaper chains will survive as single entities, rather than be broken up and sold as pieces. Already, an investment group has announced its interest in buying three of Canwest's seven major Canadian daily newspapers, the National Post, Ottawa Citizen and Montreal Gazette.

"We've clearly stated that preference was given to bids for the consolidated publishing group," said John Douglas, vice- president of public affairs for Canwest. He argues there is "more value in their collective grouping as opposed to individual properties.

Ian Morrison, president of Friends of Canadian Broadcasting, a group that advocates for Canadian control of the country's media, told Xinhua he believes it is unlikely that anyone will be able to re-establish the Canwest newspaper and TV chain and restore it to the market dominance it held a decade ago.

Morrison says he believes the break-up of Canwest is a good thing for Canada. "Canwest, at one point, had 40 percent of all newspaper circulation in the English language in Canada. By comparison, Gannett, in the U.S., had about 10 percent," he said.

The politically-connected Asper family, which built the company and held the largest block of voting stock, has seen its equity wiped out.

Before the collapse, Leonard Asper, the president of Canwest, had been urging investors to have faith in his company. He said, "given our diversity and strength of our properties, I believe that Canwest stock is significantly undervalued."

Asper, along with other private and state-owned Canadian television network executives, have launched a campaign to convince the federal government to impose fees on cable and satellite companies for carrying signals from local television networks. So far, the campaign has not been successful.

Recently, however, Prime Minister Stephen Harper said the federal government has increased its advertising spending to prop up the ailing media sector.

Canwest has been seen by analysts to have been over-leveraged for years. Canwest started as a western Canadian television network, expanded to Australia, Turkey and Ireland, then embarked on a string of deals in Canada.

 It was spurred on by media convergence theories that were popular a decade ago, when the AOL internet service provider bought up Time Warner (NYSE:TWX) in the U.S. in what was the biggest media deal in history.

The AOL-Time Warner deal was a disaster for investors, and Canwest's acquisition of the National Post newspaper and the former Southam newspaper chain, which had papers in Ottawa, Montreal, Vancouver, Calgary and other major Canadian cities, turned out to be toxic for Canwest.

In 2007, in a partnership with the New York-based banking giant Goldman Sachs (NYSE:GS) , Canwest acquired Alliance-Atlantis, a Canadian film production and distribution company that owned several lucrative cable television specialty channels. Within months, Canwest showed signs of collapsing under approximately 3.8 billion U.S. dollars worth of debt, much of it high-interest "junk" bonds that had consumed any profits that the company made in the past five years.

In October, the company's broadcast assets filed for creditor protection. The company's shares, which were worth about 15 U.S. dollars at the time of the newspaper deal, were delisted from the Toronto stock Exchange last fall. At that time, they traded for 10 cents.

At the beginning of this month, an Ontario court placed Canwest's newspaper assets in bankruptcy protection. Canwest is looking for a buyer for the newspaper chain, while the bankers have come up with their plan to sell shares in a company that will own them. The banks want at least 950 million U.S. dollars for the newspapers.

In an internal memo to employees of the newspaper operations sent out earlier this month, Dennis Skulsky, president and chief executive officer of CanWest's publishing division, said there is no danger the newspapers will have to close for lack of money to meet payroll and other expenses. As what he called "an additional safety measure," Canwest secured a 23-million U.S. dollar -debtor- in-possession loan.

"That's why we can say with confidence we can continue to meet our obligations to suppliers who provide goods and services after the filing date," Skulsky said.

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