(CNN)As Australia prepares for its election, campaigning is heating up on China’s biggest social messaging platform.
(CNN)As Australia prepares for its election, campaigning is heating up on China’s biggest social messaging platform.
Billionaire Carlos Slim won’t be able to savor his Mexican Supreme Court victory for very long.
The top court decided Wednesday to water down the nation’s telecom overhaul, four years after the landmark legislation hamstrung Slim’s market-leading wireless provider America Movil SAB. But the ruling doesn’t reverse the damage already inflicted on Slim’s company. And the industry has changed so much that the decision’s effects may be limited.
The top court said Wednesday that starting in January, America Movil can charge rivals a fee again for any calls that end up in its network. The ruling overturns a law that had left America Movil at a disadvantage, paying interconnection fees to smaller competitors but unable to collect the tariffs for calls to its subscribers. The law had been designed to help end years of dominance by Slim’s company.
But the court didn’t make the injunction retroactive, arguing consumers and the industry as a whole have benefited from the elimination of the fee. This means rivals won’t have to pay $800 million in backlogged fees.
And when America Movil resumes its fees, the rate will likely be far less than it was before Congress eliminated it in 2014. The Federal Telecommunications Institute, or IFT, is responsible for setting the rate, the court said, and is expected to do so in about two months.
The high court’s ruling is positive for America Movil, but interconnection fees are “becoming less important in a data-driven world.” said JPMorgan Chase & Co. analyst Andre Baggio. “Demand is moving away from voice, which pays interconnection, to data plans, which do not,” he wrote in a note to clients on Aug. 10.
Even so, the court’s decision raises concerns that prices will jump back up and competitors like AT&T Inc. and Telefonica SA pull back their investments. Some low-end plans that offer unlimited calls could see price increases due to the return of the fee, Baggio said.
“Two years after we arrived, we still face a dominant carrier who holds 65 percent of the market,” Dallas-based AT&T said in a statement Wednesday. “Our priority will continue to be to transform a market with effective competition, innovation and more and better options for the consumer.”
The IFT must find a way to keep regulating the dominant phone company more strictly than its competitors for as long as necessary, Telefonica said in a statement. “A change to the existing legal framework will have serious consequences in the sustainability and composition of the the telecom industry,” the Madrid-based company said.
The IFT will analyze and comply with the court’s ruling once it is published, the agency said in a statement. America Movil didn’t immediately respond to requests for comment.
America Movil shares rose as much as 0.5 percent to 16.66 pesos in Mexico City, an almost three-year intraday high. The stock has been gaining since the Aug. 10 publication of Supreme Court Justice Javier Laynez’s recommendation that America Movil’s injunction request be granted. The judicial panel amended Laynez’s proposed ruling on Wednesday, delaying the resumption of America Movil’s fees until January.
President Enrique Pena Nieto’s push to create more competition in telecommunications has hamstrung America Movil’s stock for years. Shares have generated a 13 percent return for investors, including reinvested dividends, since Pena Nieto was elected in 2012. That’s far short of the 39 percent return for the IPC index.
Since the reform took effect, America Movil has lost about 5 percentage points of market share, which stands at about 65 percent. At the same time, an ensuing price war drove mobile costs down by as much as 43 percent, according to the IFT. America Movil’s profit margin in Mexico has declined from 35 percent in 2014 to 20.3 percent last quarter.
The IFT had previously set an interconnection fee for calls ending up in America Movil’s network at 0.2045 pesos (1.2 cents) per minute — already lower than what rivals received — and is expected to arrive at the new number using price-based models.
America Movil’s 2018 estimated earnings before interest, taxes, depreciation and amortization will likely increase by about $100 million, or 1 percent, a year should the IFT set the rate at the mid-point between the current zero fee that America Movil receives and the 19-centavo levy that other companies get for calls ending in their network, Baggio estimated.
This ruling is not entirely a done deal. America Movil has also asked the Supreme Court to grant an injunction to a law that forced it to publish a public reference price for telecom services. The argument for both cases is the same: America Movil claims it’s the IFT — and not Congress — that should make those decisions. Mexico’s Supreme Court is divided into two chambers, with the second chamber issuing Wednesday’s ruling and the first chamber set to decide on the reference price. Should the rulings conflict, the full court would then take up both cases.
Bitcoin tumbled the most since July after China’s central bank said initial coin offerings are illegal and asked all related fundraising activity to be halted immediately, issuing the strongest regulatory challenge so far to the burgeoning market for digital token sales.
The People’s Bank of China said on its website Monday that it had completed investigations into ICOs, and will strictly punish offerings in the future while penalizing legal violations in ones already completed. The regulator said that those who have already raised money must provide refunds, though it didn’t specify how the money would be paid back to investors.
It also said digital token financing and trading platforms are prohibited from doing conversions of coins with fiat currencies. Digital tokens can’t be used as currency on the market and banks are forbidden from offering services to initial coin offerings.
“This is somewhat in step with, maybe not to the same extent, what we’re starting to see in other jurisdictions — the short story is we all know regulations are coming,” said Jehan Chu, managing partner at Kenetic Capital Ltd. in Hong Kong, which invests in and advises on token sales. “China, due to its size and as one of the most speculative IPO markets, needed to take a firmer action.”
Bitcoin tumbled as much as 11.4 percent, the most since July, to $4,326.75. The ethereum cryptocurrency was down more than 16 percent Monday, according to data from Coindesk.
ICOs are digital token sales that have seen unchecked growth over the past year, raising $1.6 billion. They have been deemed a threat to China’s financial market stability as authorities struggle to tame financing channels that sprawl beyond the traditional banking system. Widely seen as a way to sidestep venture capital funds and investment banks, they have also increasingly captured the attention of central banks that see in the fledgling trend a threat to their reign.
The vast amount of money amassed in a short span of time has also attracted cyber criminals, with an estimated 10 percent of money intended for ICOs looted away by scams such as phishing this year, according to Chainalysis, a New York-based firm that analyzes transactions and provides anti-money laundering software.
Chu of Kenetic Capital said he believes China will likely eventually allow token sales, but only on approved platforms, and may even vet projects individually.
“I think they will allow the sale of tokens in a format which they deem safe and more measured,” he said.
In the English town of King’s Lynn, the carcass of a shuttered department store lies next to betting shops, discount retailers and a cash-for-gold kiosk.
It’s a typical sight across a country where online shopping has taken root more than just about anywhere else. But the boarded-up facades also betray something else: how some of the biggest and best-paid investors have been saddled with unloved property that’s now taking another hit.
The Vancouver Quarter in King’s Lynn, the kind of mall ubiquitous in the U.K. since the 1960s, is one of dozens acquired by private-equity fund managers on the cheap in the wake of the financial crisis. Oaktree Capital Management LP has spent most of 2017 trying to find a buyer, just as retailers feel the knock-on effect from Britain’s vote to leave the European Union.
Right now, there are about 2 billion pounds ($2.6 billion) of shopping centers owned by private-equity funds that would like to sell, said David Lockhart, chief executive officer of NewRiver REIT Plc, which invests in malls and stores. Prices have fallen for non-prime malls by more than any other type of commercial property since the June 2016 Brexit vote, according to research by broker CBRE Group Inc.
“We are not entirely comfortable with their price expectations, which relate back to a time before the Brexit referendum,” said Lockhart. “The world has changed.”
A roster of investors from Lone Star Funds to Cerberus Capital Management LP bought U.K. malls being dumped by troubled banks, betting values would recover and they could sell at a profit. Even though the Internet had been killing off the traditional High Street for years — and still is — borrowing costs were at a record low and consumer spending remained a key driver of the economy.
Private-equity real-estate funds spent 5.6 billion pounds on U.K. malls since 2010, according to data compiled by broker Savills Plc. It accounted for about a fifth of all mall purchases in the country. In the first quarter of this year, the number of transactions slumped to 2008 levels, data compiled by broker Cushman & Wakefield Inc. show.
The investors typically spend about three to four years buying assets followed by four to five years managing and selling them on. They usually aim for returns of 15 percent to 20 percent and are richly rewarded, charging about 1.5 percent to manage the investments with performance fees of up to 20 percent if they hit targeted returns.
Managers that sold malls in the years running up to the Brexit referendum did well.
Blackstone Group LP’s third European real estate fund, which completed raising money from investors in 2009, achieved returns of 16 percent as of June 30. It bought several malls in a joint venture with Catalyst Capital Group Inc., including the Houndshill Shopping Centre in the northern English seaside town of Blackpool. The funds paid about 85 million pounds in 2011 and eventually sold it for 105 million pounds in 2015, or 24 percent more.
But now, households are curbing spending as the pound weakens and inflation outpaces wage increases. Retail sales are growing at the slowest pace for four years. It’s left money managers either having to bide their time or look at alternatives for sites they can’t sell, such as changing the mix of use to include less retail and more leisure or housing.
“The model of private equity has been to buy it, fix it and sell it to institutions, but that conveyor belt is broken at the moment,” said Mark Robinson, property director at Ellandi LLP, which co-invests and manages U.K. malls on behalf of buyout firms including Lone Star Funds, Angelo Gordon & Co LP and Colony Capital Inc.
U.K. malls like Oaktree’s in King’s Lynn were bought by the funds through portfolios of soured loans sold by banks after the global financial crisis sometimes for as a little as 20 pence in the pound. A spokeswoman for Oaktree, which acquired that particular space five years ago, declined to comment on the firm’s investments.
New York-based Cerberus, the biggest buyer of such debt in Europe, owns at least six regional U.K. malls, according to data compiled by Trevor Wood Associates, which publishes research on the retail industry.
The Gyle Shopping Centre on the western fringe of Edinburgh was the largest property in a 4.5 billion-pound portfolio of non-performing loans bought by Cerberus from Ireland’s National Asset Management Agency Investment Ltd. in 2014. Cerberus offered it for sale in early 2015. Nearly three years later, the property still hasn’t traded. A spokeswoman for Cerberus declined to comment.
Big investors like insurers and pension funds, meanwhile, generally have shied from all but the best U.K. malls and shifted into new areas like rental homes, healthcare and retirement housing.
“The search for stable income has increasingly taken them away from the retail sector because it has become a more volatile environment,” said Robin Martin, a director at Legal & General Group Plc’s investment management business.
Another group, real estate investment trusts, has also balked. Companies including Land Securities Group Plc and Hammerson Plc sold smaller shopping centers and paid high prices to reinvest in malls that dominate a region and can attract footfall.
Hammerson, the U.K.’s largest REIT specializing in retail, is focused on malls where brands can “showcase their full range, where we can offer an experience beyond retail, with catering and leisure,” CEO David Atkins said in an interview. “Centers that don’t offer that and can’t offer that I think could well be challenged going forward.”
As a result, buyout firms are undertaking increasingly radical redevelopments and bearing the cost. Blackstone halted a plan to sell the St. Enoch Centre in downtown Glasgow in 2015 after bids fell short of expectations. The firm is now replacing a store vacated by defunct retailer BHS Ltd. with a cinema and more restaurant space.
Clearbell Capital LLP, an investor headquartered in London, has almost completed a total repositioning of the Gates shopping center in the northeast university city of Durham. When the company bought the mall in 2014, it had 49 stores. It’s replacing about half the units with roughly 250 student apartments, a cinema and a new row of riverside restaurants.
At Stretford Shopping Centre in the urban sprawl around Manchester, Apollo Global Management LLC and M&M Asset Management plan to demolish a section where all the stores are empty to try and reverse a slump in shoppers since 2008, according to a filing with the local municipality. They may build homes instead.
“The real problem is the mid-range centers which are in smaller towns or those that are the second best in a larger city,” said Tom Sharman, head of research and strategy for real estate finance at Royal Bank of Scotland Group Plc. Unless you can sell it to the local government, “then I think you are going to struggle to find a buyer,” he said.
One of Dara Khosrowshahi’s first tasks at Uber Technologies Inc. will be coming up with a new set of core principles. Uber’s board ripped up parts of the original list of 14 corporate values, authored years ago by co-founder Travis Kalanick, after they were used by employees to justify malicious behavior around the office.
Rewriting the company’s ethical code will be a symbolic way for the newly appointed chief executive officer to put his stamp on a company scarred by months of management turmoil, allegations of widespread sexual discrimination and mounting legal threats.
Uber is turning to the 48-year-old Expedia Inc. CEO to articulate what the transportation Goliath should stand for and inspire a workforce of more than 15,000. His reputation as a man of principle with little ego is a stark contrast to his predecessor, a brawler who became enmeshed in a wide array of scandals, according to people who have associated with both men.
Kalanick introduced the new CEO to employees at a staff meeting Wednesday morning. Khosrowshahi, who starts Sept. 5, cracked jokes and fielded inquiries. In response to a question about going public, he said it would probably happen in 18 to 36 months, according to two people who listened to the meeting. “It’s my opinion that the company should go public,” he said.
In addition to taking the CEO chair, Khosrowshahi will likely get a seat on the board opposite Kalanick. Meanwhile, the former chief has expressed interest in returning to a more active role at the company since he was ousted in June, creating a potentially awkward dynamic that Khosrowshahi will need to manage. Past colleagues, friends and family describe Khosrowshahi as an understated, measured negotiator, who will challenge anyone who stands in the way of what he believes in, including the U.S. president — someone he’s antagonized on multiple occasions.
“I saw him work with strong personalities and complex situations, and simplify to focus on what actually matters,” said Jeremy Liew, a venture capitalist who reported to Khosrowshahi at IAC/InterActiveCorp. “He has a strong moral compass.”
Khosrowshahi was shaped by his escape from Iran as a boy, just before the chaos of the 1979 revolution. He came with his family to the U.S. as a 9-year-old refugee. He grew up in Tarrytown, New York, with his mother and brothers. For most of his teenage years, his father was detained in Iran after returning to care for Khosrowshahi’s grandfather.
Even in re-telling the story in a letter to employees following Donald Trump’s ban on immigration from certain Muslim-majority countries, he deflected sympathy. Though a refugee, Khosrowshahi said, he didn’t feel like one as a child. “For the grown-ups, it was a difficult transition,” he told Bloomberg Businessweek this year. “The kids were able to party together, so it was fun.”
The family prospered and ascended America’s business ranks. After studying engineering at Brown University, Khosrowshahi took a job at investment bank Allen & Co., where his brother is a top dealmaker today. Their cousins are prominent venture capitalists and senior technology executives at Intel Corp. and Alphabet Inc.
Barry Diller, the billionaire media mogul, recruited Khosrowshahi into his inner circle during the dot-com frenzy in the late 1990s. Diller asked Khosrowshahi to scout acquisition targets and put together the sprawling internet empire known as IAC. He worked on the company’s purchase of Expedia in 2003 and then took over the online travel business.
Peers in the corporate world admire Khosrowshahi for his trustworthiness and strong values, traits that can be hard to find in the world of deal-making. “I just found him to be one of these solid, hopeful, humble leaders,” said Omid Kordestani, Twitter Inc.’s chairman and a fellow Iranian immigrant who makes a point of seeking out Khosrowshahi at the annual Allen & Co. conference in Sun Valley, Idaho.
Khosrowshahi has been a central figure in the travel industry for more than a decade. He oversaw the spinout of Expedia from IAC in 2005 and then led a corporate shopping spree with shareholders’ blessing. He spent the last few years orchestrating mega deals. He dropped nearly $5 billion in a single year on just two companies, Orbitz and HomeAway. While Expedia’s market value is dwarfed by Priceline Group Inc., Khosrowshahi’s company has outperformed its larger rival’s stock since the acquisition binge in 2015.
But Khosrowshahi’s track record isn’t spotless. He took a pass on buying Booking.com in the mid-2000s. Priceline purchased the site soon after for $135 million, turning it into one of the most successful acquisitions of its time. It now contributes about 80 percent of Priceline’s $12 billion annual revenue. This year, Expedia needlessly invited Uber-like controversy. It was one of the last remaining advertisers with Fox News’ “The O’Reilly Factor” after dozens of brands dropped the show amid sexual harassment allegations about its host.
In contrast to the unscripted persona of Kalanick, a 41-year-old paper billionaire who coined the phrase “Boob-er” to describe his company’s ability to attract women, Khosrowshahi carefully curates his image. He has four children from two marriages. He fills his Twitter feed with pictures of family, thanks to his mother and wife for their support, and grainy concert photos of dad-rock bands like the Shins and U2.
Colleagues said he doesn’t take himself too seriously. He goes all out for company Halloween parties, showing up dressed as the Flash or Darth Maul from Star Wars. A few years ago, Khosrowshahi and Expedia’s finance chief sported matching ketchup and mustard costumes with the tagline “Chief Condiment Officers.” (Mark Okerstrom, Khosrowshahi’s ketchup companion, is a likely candidate to replace him in the top job at Expedia.)
Khosrowshahi engenders admiration from his subordinates. At trade conferences, he’s known to post up by the bar and chat with any colleague or entrepreneur passing by. “He has the highest character possible,” said Sean Shannon, who ran Expedia’s Canadian and Latin American business until 2015. “He is sincere, respectful, highly respected and a straight talker.”
One area where Khosrowshahi and Kalanick overlap is in their stance against President Trump. For Kalanick, it took a boycott of some 500,000 customers to delete their Uber apps, prompting him to step down from a Trump business council and denounce the president’s immigration policies. Khosrowshahi was vocal in his opposition to the travel bans, and Expedia joined a court case to fight the policy. After Trump’s perplexing response to violence in Charlottesville, Virginia, Khosrowshahi criticized the president on Twitter this month, saying he failed to “rise to the expectations of his office.”
Immigration is a key issue for Uber. The company has said 15 percent of U.S. employees are on work visas, and the service is a common way for immigrant drivers to make a living. While Khosrowshahi probably won’t win over Trump anytime soon, he has fans in Washington. “Dara gets business and tech; he gets people; and he gets government,” said Julius Genachowski, chair of the Federal Communications Commission under President Barack Obama and a former colleague of Khosrowshahi at IAC. “He has the strength and perspective to lead Uber through its complex opportunities and challenges, both in the U.S. and around the world.”
But the situation at Uber is unlike any Khosrowshahi faced at Expedia. The ride-hailing company has been a favorite target for regulators practically since its inception and more recently has battled lawsuits threatening to upend the future of autonomous driving research, the way it negotiates with drivers and the composition of the company’s board.
There’s also a still-simmering cultural crisis, which boiled over this year after a former employee published allegations of sexual harassment and widespread gender discrimination. Uber commissioned a pair of human-resources probes, including one led by former U.S. Attorney General Eric Holder. As a result, the board decided to scrap some of Kalanick’s cultural values for the company, including ones that encouraged “toe-stepping” and asked workers to “always be hustling.” Uber also fired more than 20 employees and released a diversity report, which laid bare a disproportionately male workforce.
Expedia is one of the most diverse places to work, at least by tech industry standards. Women account for half of global staff and a quarter of technical workers. At Uber, 15 percent of tech staff are women, one of the lowest proportions among industry peers.
Uber’s board selected Khosrowshahi on Sunday over two other finalists. Jeffrey Immelt, the 61-year-old chairman of General Electric Co., failed to win over the board, which scrutinized his performance at GE among other concerns. Meg Whitman, chief of Hewlett Packard Enterprise Co. who’s also 61, publicly turned the job down multiple times while continuing to interview privately. She and Kalanick didn’t see eye to eye, people familiar with their interactions said. That conflict still doesn’t obscure the fact that Uber went with Khosrowshahi over a qualified female candidate.
In an interview Tuesday, Khosrowshahi suggested he would prioritize diversity issues at Uber. He was optimistic about Uber’s prospects despite the many challenges. “Uber is a company that is redefining the transportation industry on a global basis,” he said. “To be part of that story is something that is interesting and would be a real privilege.”
Kalanick welcomed his successor in an emailed statement Tuesday night. The ex-CEO complimented Khosrowshahi’s “deep passion for team building.” Kalanick concluded: “I couldn’t be happier to pass the torch to such an inspiring leader.”
But the wounds left after Kalanick’s reign are causing some investors to question Uber’s ability to recover. Benchmark, the largest venture capital backer, is suing Kalanick for fraud — allegations the co-founder denies. Several mutual funds marked down the value of their Uber holdings. And a group of investors are looking to snap up a large chunk of stock from shareholders at a discount, while offering the company a smaller sum at the same $69 billion valuation from last year.
The circumstances are probably too daunting for any CEO to fix on his own. Khosrowshahi will have plenty of spots to fill in his leadership team for help getting the job done. After this year’s turbulence, at least 10 senior executives ran for the exits or were pushed out.
For more on Uber, check out the podcast:
604 14th Ave North West
Kasson, MN 55944