BUSINESS WITH PERSONALITY
BSkyB saysit is still fitto broadcast
BSKYB yesterday defended itself against mounting politicalpressure over its biggestshareholder News Corp, insistingthat it remains a “fit and proper”British broadcaster.News Corp also leapt intodefence mode yesterday following a bruising parliamentary report onphone hacking at its subsidiaries.Its directors stated their “fullconfidence in Rupert Murdoch’sfitness and support for hiscontinuing to lead News Corp intothe future.”But left-wing politicians piled into criticise the media tycoon.Deputy prime minister Nick Cleggsaid yesterday that “there are very serious question marks about the basic accountability and corporategovernance” at the News Corpstable in light of the culturecommittee’s report. And Labour leader Ed Milibandtold the BBC that “Ofcom needs toadd urgency to its investigation”into Murdoch’s fitness to own amedia group following “very very serious wrongdoing at NewsInternational”.But BSkyB chief Jeremy Darrochgrabbed the opportunity of hiscompany’s record results to say:“We believe that Sky’s track recordas a broadcaster is the mostimportant factor in determiningour fitness to hold a licence.”He also set out theresults of areview at Sky News to emphasise itsdistance from under-fire peer NewsInternational. It said law firmHerbert Smith had found “noevidence of impropriety or causefor concern” in Sky News’ emailsand payment records.
Mervyn King believes that his reforms are the only way forward for the City of London
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MERVYN King hit out at his increasingnumber of critics in the City and Westminster last night, saying “vestedinterests” who wanted to defend their bonuses and profits were no match fora central bank with “over three cen-turies of history”.In an extraordinary attempt todefend his record in power, he said hehad seen the crisis coming but had been powerless to stop it because theBank’s wings had been clipped in 1997.His comments at the BBC’s Today Programme lecture will raise eyebrowsin the City, where a growing numberof players privately argue that hefailed to hike interest rates during the bubble years and refused to provideenough liquidity to the financial sys-tem during the early months of thefinancial crisis, making matters worse.But King said he did try to warn reg-ulators and banks and that nobody lis-tened to him. He said he wished hehad shouted louder.Striking a defiant note, King defend-ed the wide-ranging powers he ispoised to grab and claimed his reformsto the banking system will have a long-term impact on the UK. He said that heis seizing this “historic opportunity” topass on a legacy of economic stability.King defended his record in office,arguing that he was successful in therole he was given, and that inflation was under control before the crisis. The new structure of the Bank seeksto focus on the big picture, recognis-ing and acting on risks preemptively – which he says should always have beenin the Bank’s power. King said:“Already we see vested interests rise upto defend their bonuses and profits.But, as an independent central bank with over three centuries of history, we can resist those short-term pres-sures and take the longer view neededto prevent another crisis.”But critics believe that the Bank is being unrealistic in believing that pay and dividends can be slashed. They also argue that his desire to hike capi-tal requirements –discussed again yes-terday –have gone too far and are themain reason for the scarcity of credit.Recent Bank critics include Treasury Select Committee chairman Andrew Tyrie, who warned new banking rulescould worsen the squeeze, ex-MPCmember Andrew Sentance who thinksKing is risking inflation; Peter Sands of Standard Chartered; and DavidCumming of Standard Life.
BORIS AND KEN NECK AND NECK AS POLLING STATIONS OPEN
BY MARION DAKERS
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ISSUE 1,625 THURSDAY 3 MAY 2012
See Pages 2, 11, 19, 23
ALLISTER HEATH:
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BSKYB RESULTS:
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Certified Distribution27.02.2012 till 01.04.2012 is 99,462
BY TIM WALLACE
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KING DEFIES
CITYCRITICS
D-DAY FORLONDONERS
allister.heath@cityam.comFollow me on Twitter: @allisterheath
IN BRIEF
BP settlement gets initial nod
n
A US federal judge has givenpreliminary approval to a proposedclass-action settlement that wouldresolve billions of dollars in claimsagainst BP over the 2010 Gulf ofMexico oil spill. US District judge CarlBarbier's ruling yesterday allows thesettlement process to proceed, but hewill hold a “fairness hearing” later thisyear before deciding whether to givefinal approval. The deal between BPand a team of plaintiffs’ attorneys isdesigned to resolve more than100,000 claims by people andbusinesses who blame the spill foreconomic losses. BP estimates it willpay about $7.8bn to resolve theseclaims.
Zoellick defends World Bank role
n
Outgoing World Bank PresidentRobert Zoellick last night gave animpassioned defence of the institutionhe has run for five years and urged hissuccessor to focus on developingcountries as clients rather than aidrecipients. “We’re beyond a model ofcharity to poor people,” Zoellick said“If you just take the US, four per centof the world’s population, 20 or moreper cent of the world economy - youhave an interest in what’s happeningout there.” If rich countries ignoreglobal poverty, “it becomes breedinggrounds for problems,” Zoellick said.The US has been the World Bank’sbiggest shareholder since its start. Buthuge US deficits have put pressure onall, raising questions about continuedsupport by Washington for the Bank'santi-poverty programmes.
G E T T Y
Heathrow’s border staffset to walk out on strike
THE MAMMOTH queues atHeathrow passport control couldget even longer next week, when UK Border Force staff walk out on strike. The government confirmed lastnight that more than 4,000 mem- bers of the Immigration ServicesUnion are joining public sector workers in a national strike overpensions on Thursday 10 May, leav-ing Britain’s airports and bordersshort-staffed.ISU deputy general secretary Lucy Moreton said the union has hun-dreds of members at Heathrow “soit will have a significant impact” atEurope’s busiest airport.“We don’t want to cause disrup-tion, but if the Cabinet Office con-tinues to ignore our concerns overpensions then that is what we aregoing to do,” she added. Another union, the PCS, hasalready said its 9,000 Border Force workers across the country will walk out next Thursday.Immigration minister DamienGreen said “tried and tested contin-gency plans” will be used to try andminimise disruption, and slammedthe strike as “completely unneces-sary”.Earlier this week Green promisedto draft in 80 extra staff to man theimmigration desks at Heathrow
THE GOVERNMENT’S budgetdeficit will go up, not down asplanned, this year because of thenew recession, the Confederationof British Industry (CBI) warned yesterday.Borrowing will rise to £128.2bnin 2012-13, the respected business group said, £8bn higher than theOffice for Budget Responsibility (OBR) expects and £2.2bn above the£126bn borrowed in 2011-12.Meanwhile Legal and Generalanalysts warned that in the longer-term, economic growth may neverreach the levels the governmenthopes for.“The OBR’s forecasts for global growth of five per cent areunsustainable – in the years up to2007, these rates caused theeconomy to overheat, leading torecession,” said James Carrick. As a result, UK growth will reach1.5 per cent in the next five years“in a best case scenario”, half of theOBR’s three per cent forecast andleaving the government with a fiveper cent budget deficit in 2016-17.However, Carrick said there wasno real alternative to the government’s deficit reduction,adding more government spending would risk creating a bond crisis.“The government is damned if itdoes and damned if it doesn’t,”Carrick concluded.
CBI: slump willmake Osbornemiss debt goal
Passengers at Heathrow have complained of ever-growing queues at passport control
2
NEWS
BY TIM WALLACEBY MARION DAKERS
To contact the newsdesk email news@cityam.com
S
IR Mervyn King, the governor of the Bank of England, is not onefor mea culpas. His speech lastnight was an extraordinary defence of his record in office – and alargely unfair attack on hisdetractors, ignoring their intellectualarguments and questioning theirmotives. He did admit that he shouldhave done more but his mainargument was that he didn’t have theright tools to act. His concession wasthat he didn’t “shout” loudly enoughabout the rise in risk. Those who believe that the crisis wasa case of pure, unprompted animalspirits in the City will have seen all of their prejudices reinforced; but those who believe that blunders from cen-tral banks were one of the key factorsencouraging lenders and borrowers toact stupidly were left disappointed by King’s analysis. His claim that this
EDITOR’SLETTER
ALLISTER HEATH
Mervyn King should have hiked rates to deflate the bubble
THURSDAY 3 MAY 2012
was a bust with no boom was espe-cially unconvincing. The Bank could (and should) have jacked up interest rates at the heightof the bubble; it didn’t need extrapowers to deflate the housing boomand thus rein in the insane expansionof Northern Rock and others. HigherUK base rates would also have made itharder for HBOS’s crazed commercialproperty lending. The need to target afaulty consumer price index measureof inflation need not have con-strained him excessively – higherrates could have been justified to pre- vent a bubble turning into a crashand hence disrupting the price level.Increasing UK base rates would nothave been a panacea: this was a global bubble, fuelled by lower long-term borrowing costs set in the bond mar-kets and heavily influenced by globalEast-West imbalances, the actions of the Fed and China’s currency manip-ulation. But the Bank could havedone far more even with the tools ithad (and did King really opposeLabour’s decision to strip the Bank of its regulatory powers in 1997?).King is also wrong to emphasise, atthis stage in the cycle, the need forincreased capital requirements. He isright that Banks need to hold enoughequity against their loans to makesure they are cushioned against loss-es. But the new, ever increasing capi-But King is wrong to dismiss theapplicability of such resolution proce-dures for the largest, universal banks.He remains excessively attached tothe Vickers report, a mixed bag of adocument which doesn’t representthe best way forward. All in all, notKing’s most enlightening speech.
BACK BORIS
TODAY is election day for Londoners. As I explained at length in this space yesterday,
City A.M.
believes that Boris Johnson is the best man for theMayor’s job and that he deserves a sec-ond term. The race will be much clos-er than many believe – so make sure you have your say. If you haven’t voted yet, there is still time: the polling sta-tions close at 10pm tonight.tal requirements have now gone toofar: they are making a whole range of loans unviably costly and reducingthe supply of credit beyond what isprudent. Normally, in a downturn, banks should reduce their reserves;and they should increase them in anupturn. We are doing the opposite, which is madness.Bailouts are immoral. The fact that we had a system that actually encour-aged them was unforgivable. Astonishingly, the authorities didn’thave a Plan B in case a bank failed – it was simply assumed it would be bailed out. This created enormousmoral hazard. We need – and King isright about this – special bankruptcy procedures for banks that allow themto be wound down in a controlledmanner, wiping out shareholders as well as bondholders while protectinginnocent bystanders and taxpayers.after a week of two-hour waits forsome passengers, which he blamed onthe wet weather but the Labour party linked to staffing cuts.Boris Johnson this week wrote tohome secretary Theresa May to warnthat the delays are creating “a terribleimpression of the UK” ahead of theOlympic Games.“Our border controls are an interna-tional embarrassment, putting British jobs and economic growth at risk –and this strike will make that worse,”added Institute of Directors headSimon Walker. The ongoing problems are not isolat-ed to Heathrow – a spokesperson forEurotunnel said its passengers wasalso experiencing delays at borderchecks, adding that the Channel Tunnel “is already seeing an increasein business on the back of theOlympics”. The 10 May strike action couldencompass hundreds of thousands of public sector workers, including staff at the Ministry of Defence, the NHS,local authorities and the civil service.
THE FORUM:
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Airline levy could aid UK border
Two Democratic senators have turned upthe political pressure on News Corp,reviving questions about whether ascandal at Rupert Murdoch’s UKnewspapers could jump the Atlantic. SenJay Rockefeller of West Virginia haswritten to Lord Justice Leveson asking forany evidence that “troubling andsometimes criminal conduct” hadoccurred in the US or involved US citizens.
Squeeze on banks hits project finance
The government’s plans to invigorate therecession-hit economy by attractingprivate capital into big infrastructureprojects are being jeopardised by a sharpslowdown of the project finance market,used to fund railways, hospitals, airportsand power plants. Senior bankers say thetraditional project finance model –usinglong-term, low-cost loans secured by theincome stream of the underlying assets –is in effect broken because of shrinkingbank finance and regulatory pressures.
Nokia missed smartphone revolution
Nokia will launch a range of tablets and“hybrid” smart mobile devices as it seeks toturn round the fortunes of its ailing handsetbusiness, chairman Jorma Ollila told the FT.
Tesco tempts savers with new bond
Tesco Bank is again cashing in on thepublic’s desperation for inflation-beatingyields by launching an 8½-year bond thatwill pay out 5 per cent a year in interest.
Flu camp catches the flotation bug
The operator of a “flu camp”, in whichvolunteers are deliberately infected withthe sniffles, is going public in a £33mflotation that will raise money to buythousands of vials of the influenza virus.The stake held by chair David Norwoodwill be valued at £2.6m in the offering.
Justify your salary, watchdog tells MPs
MPs should justify their £65,738 a yearsalaries, the head of the Commons’expenses watchdog has said. Sir IanKennedy, the head of the IndependentParliamentary Standards Authority, madethe comments as he launched a wide-ranging consultation on MPs’ pay.
£90bn of government projects at risk
A fifth of the Government’s biggestprojects are in danger of over-running,over-spending or failing outright, aWhitehall audit has found.
Gingrich formally exits 2012 race
Newt Gingrich said he is ending his run forpresident, but the former House speakersaid he plans to remain a force in thecampaign. But his praise for Mitt Romney,who he has conceded will be theRepublican nominee and has told he willeventually endorse, was at best tepid.
S&P raises Greece’s credit rating
Standard & Poor’s said yesterday it raisedGreece’s credit rating to CCC from SD(selective default) after the countrycompleted its distressed debt exchange.
WHAT THE OTHER PAPERS SAY THIS MORNING
The new jobs website for London professionals
CITYAMCAREERS.com
THE DECLINE of Nokia’s prominenceas the top mobile phone maker wasemphasised yesterday in a reportfrom the International DataCorporation, which showed thatSamsung has pipped the creator of the eponymous ringtone to thecoveted top spot.Samsung shipped 93.8m mobilephones in the first quarter of this year, soaring past Nokia whoseshipments dropped by almost aquarter to 82.7m. This is the first time since theIDC’s Mobile Phone Tracker waslaunched in 2004 that Nokia has notled in total mobile phone shipments. The South Korean company alsoovertook Apple as the world’s topsmartphone vendor, establishing anew market record for the numberof smartphones shipped in a quarter. While Apple increased itsshipments by 89 per cent in theperiod to a total of 35.1m iPhones,Samsung topped the table by growing its sales 267 per cent to42.2m smartphones. With respective market shares of 29.1 per cent and 24.2 per cent,Samsung and Apple dominate morethan half of the smartphone market.Research in Motion reached a low not seen since 2009, with BlackBerry shipments declining by 29.7 per centto 9.7m in the quarter.
Samsung soarspast rivals totop the tables
BY LAUREN DAVIDSON
SHARES in Cable & Wireless Worldwide dropped by six per cent yesterday morning as investors ago-nised over the prospect of Vodafone’s£1.04bn takeover bid.Orbis Investment Management,CWW’s biggest shareholder with a 19per cent stake, reiterated its discon-tent with Vodafone’s 38p per shareoffer for the ailing cable company. When Vodafone last week tabled its bid for CWW, claiming to have irrevo-cable undertakings or letters of intentfrom 18.6 per cent of shareholders,Orbis said it could not commit to backing the deal because it did not“reflect the value inherent in CWW”. The fund manager has since saidthat it could fight to remain a minor-ity shareholder in a Vodafone-ownedCable & Wireless.It added that it knows “very well therisk that Vodafone may withdraw itsoffer and CWW’s share price may fallin the short term.” Vodafone’s offer stipulates that inreturn for total control of the compa-ny, at least 75 per cent of CWW’sshareholders must approve the deal.
Bid fears as toptelco investorputs up a fight
BY LAUREN DAVIDSON
The telecoms giant has said it willnot raise its offer price but it reservesthe right to implement a standardtakeover procedure, which requires 50per cent approval and would allow minority shareholders to remain.Orbis is unlikely to be able to holdout unless other shareholders take itsside, but the fund manager is on famil-iar ground. It refused to tender its 10per cent stake in printer maker Océ tocamera giant Canon, remaining aminority shareholder after the
€
8.60 ashare takeover in January 2010.Orbis then sold its holding to Canonin December 2011 for an undisclosedsum, understood to be a significantmark-up on the original offer price.
Cable & Wireless Worldwide PLC
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33.5034.0034.5035.0035.5036.0036.50
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GLOBAL asset management firmCarlyle Group lowered its IPO priceahead of its Nasdaq debut today.Last night Carlyle, which hasabout $147bn in assets undermanagement, priced its flotation at$22 a share, falling short of the $23-$25 range initially touted.Carlyle raised $671m from thesale of about 10 per cent of itsstock, sending the private equity firm towards a $7bn market cap.The lower offering price wasthought to be an attempt to attractcertain desirable largeshareholders and to encouragestrong trading on its first day as a
Carlyle Group raises $671m as itlowers IPO price ahead of listing
BY LAUREN DAVIDSON
listed company. And the plan seems to have worked. Sources said yesterday thatCarlyle has taken orders for morethan the 30.5m shares on offer. According to Dealogic, if the fullover-allotment of Carlyle’s shares isused –pushing the takings up to$772m –it would be the biggest IPOthis year by deal size and the third biggest private equity float behindKKR and Blackstone.Proceeds from the IPO will beused to pay down debt and financeoperations, acquisitions and newfund commitments, the firm said. JP Morgan, Citigroup and CreditSuisse and BoA Merill Lynch actedas underwriters on the flotation.
HANDSET WARS:
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THURSDAY 3 MAY 2012
3
NEWS
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Carlyle co-founders William Conway, Daniel D’Aniello and David Rubenstein
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