Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast app, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at www.businessacumen.biz.
I am Leon Gettler. My job is to review and monitor the week’s news in business, finance and economics. I bring it all to you, every week.
This is episode number eighteen in our series for 2019 and today’s date is Friday May 31.
First I talk to Adam O’Neill, the managing director of Y Soft, and he explains how companies need to change their print services to support the rising trend in the number of mobile employees.
And I’ll be talking to RMIT economist Sinclair Davidson looking at what the economic challenges are for the newly elected Morrison government.
But first, let’s talk to Adam O’Neill.
It was sold as a way to turn Britain into an economic powerhouse, but the only people benefiting from the Brexit vote so far seem to be Britain’s direct competitors. New York has now steamed past London as the world’s leading financial centre due to the “full-blown crisis” of Brexit, according to a survey of financial experts from around the world. Consultants Duff & Phelps released the results of its annual survey after speaking to 180 executives. Just over half of respondents now see New York as the world’s top financial center, which is up 10 percent from last year, while 36 percent see London as the leader after a 17 percent drop from 2018.
James Murdoch has signaled plans to have “precisely zero” involvement in his family’s remaining businesses following the sales of 21st Century Fox and Sky, in a historic split of the world’s best-known media dynasty.
The comments to friends inform a new book, The Battle for Sky, which chronicles the rise of Britain’s dominant pay-TV operator and the struggle of the Murdoch family to gain full control over it. The book describes how James, 46, and his father, Rupert Murdoch, now 88, quashed opposition from his elder brother Lachlan, 47, to break up and cash in a global entertainment empire built over three decades. Sky was sold to US cable giant Comcast in a £30 billion ($55 billion) auction last October, while Disney acquired most of 21st Century Fox in a $US71 billion ($102.2 billion) merger that changed the shape of Hollywood as it comes under attack from Netflix and other tech giants.
The sales triggered a $US2 billion payday for each of the Murdoch children and are expected to trigger James’s departure from the family business. He has made clear he opposes the populist politics of Fox News, which is now under Lachlan’s control and the central asset of a “new Fox” in which he plays no part. James is for now still on the board of News Corp publisher of The Sun but is focused on Lupa Systems, a new investment vehicle
Fiat Chrysler Automobiles has submitted a proposal for a merger with Groupe Renault. According to a statement from Fiat Chrysler Automobiles, the combined business would be owned 50/50 between shareholders of FCA and Groupe Renault. A board of governors would hold a majority of independent directors. The joint organization would produce estimated sales of 8.7 million vehicles a year and would be considered the world’s third largest car manufacturer.
Fiat Chrylser said the combined entity would be “carried out as a merger transaction under a Dutch parent company.” The press release from Fiat Chrysler added that there would be no plant closures as a result of the tie-up and the union should provide an opportunity to lead in the development of electric and autonomous vehicles
Australians are confident following the federal election and anticipating a rate cut in June with the ANZ-Roy Morgan Consumer Confidence Index rising to 118.6 last week, leaving it at the highest level in a little over a month. The index now sits comfortably above the series long-run average of 113.1.
Anthony Albanese has been warned by colleagues to hold the line against the government’s medium-term tax cuts as the incoming Labor leader puts his stamp on the job by offering to work with Prime Minister Scott Morrison on key policies to end “conflict fatigue”.
Meanwhile, the Coalition has opened a dialogue with key Senate crossbenchers, who have requested a briefing with Reserve Bank governor Philip Lowe and Treasury secretary Phil Gaetjens as they consider whether to support the government’s entire $158 billion tax cuts package. Centre Alliance’s Rex Patrick and Stirling Griff could help the government pass the package without Labor’s support, but will need to be reassured by regulators that there is a sufficient budget buffer to weather growing economic headwinds. Finance Minister Mathias Cormann called the South Australian crossbenchers, but Senator Patrick said negotiations had not moved beyond a “holding pattern”.
Mr. Albanese challenged Mr. Morrison to recall Parliament before June 30 to pass the first tranche of the tax cuts package, which mostly benefits low- and middle-income earners. He pledged Labor’s support for that stage, while the later stages were “up for discussion and debate”. But there is concerted resistance within the party for a deal with the government. Outgoing Labor senator Doug Cameron, who remains in the caucus, said it was “crazy to be proposing tax cuts so far out when you don’t know what the economy’s going to look like”.
The new Minister for Communications, Cyber Safety and the Arts Paul Fletcher says getting a return for taxpayers’ multibillion-dollar investment in the NBN is a key focus for the Morrison government. He has also flagged the rollout of 5G mobile infrastructure as critical in setting up Australian business to compete strongly on the global stage. At the end of June, the Australian Competition and Consumer Commission will hand the government the final report of its 18-month digital platform inquiry.
The broadcast and production industries both want different changes to old content regimes and the telcos are preparing for the rollout of 5G, which is expected to dramatically increase mobile speeds. Mr. Fletcher told he was prepared for “robust” discussions with the telco industry over NBN pricing, having had much experience as an Optus executive in the early 2000s negotiating wholesale access to Telstra networks.
Telco chief executives from Telstra’s Andy Penn to TPG Telecom’s David Teoh have relentlessly attacked NBN wholesale pricing as not leaving enough margin for broadband services to be profitable for resellers. It will undoubtedly be one of the key issues telcos will continue to lobby on. Mr. Fletcher replaces Mitch Fifield, who had served as Minister for Communications and Arts since 2015.
Some of the world’s largest investment banks face an Australian class action. According to a Sydney Morning Herald report, law firm Maurice Blackburn announced the action against UBS, Barclays, Citibank, JPMorgan and NatWest which claims, according to the report, that chat rooms were allegedly used to manipulate financial rates through the sharing of confidential client information about upcoming orders and prices. This comes after investigations into rate fixing by regulators in the United Kingdom, the United States and Europe.
Hackers stole customer data from Australian online graphic design platform Canva. The company — which recently completed a $70M funding round valuing the company at $2.5B — had data such as usernames, email addresses and passwords for millions of users taken, but since it is encrypted, it would reportedly be difficult for the hackers to sell the information piecemeal on the dark web. Subscribers have been told to change their passwords. Canva is used by individuals and large companies to design logos and marketing materials.
Swedish private equity company EQT Infrastructure has bid to acquire 100 percent of telecommunications company Vocus Group at a substantial premium. The $3.3 billion, or $5.25 per share, the offer represents a 35 percent premium on the $2.4 billion company’s Friday closing share price of $3.89. EQT has been granted non-exclusive to Vocus’ books, in a process that the company said could take several weeks. Investment bank UBS and law firm Allens are advising Vocus on the potential deal.
Commonwealth Bank chief executive Matt Comyn has vowed to “embrace a new mindset” by fixing mistakes faster and overhauling the customer experience of banking by slashing fees. In his first major speech as CBA’s boss, Mr. Comyn, who has been in the top job for just over a year, told a business lunch on Tuesday that restoring community trust will require more action that puts customers first.
As each of the major banks grapples with how to repair reputations battered by the Hayne royal commission, Mr Comyn said that Commonwealth Bank will be “embracing a new mindset, where we are listening and hearing more, owning mistakes and fixing them faster, putting customers first, and harnessing the full potential of our people and our technology to make a meaningful difference in our customers’ lives”. The process of repairing trust will also require banks to forgo hundreds of millions of dollars in profits.
Mr. Comyn pointed to CBA’s decision to forgo $415 million in annual fee revenue – after it decided to notify customers about how to avoid late-payment or overdrawn fees – as an example of how to provide better service. His speech to the Trans-Tasman Business Circle has also been designed to inspire CBA staff, amid rumors of bank closures and redundancies and a customer backlash after the Hayne inquiry heard evidence of CBA’s loose lending standards, poor administration processes, and reliance on a conflicted broker network. Mr Comyn urged his troops to think about the principles that led to Commonwealth Bank’s creation in 1911, observing it was the loss of trust in the banking system at the end of the 19th century – after many private banks collapsed in the 1890s, triggering a deep recession – that crystallised CBA’s core purpose to assist the economy to flourish by supporting businesses and all Australians.
Vodafone Hutchison Australia says its 5G network will be smaller, slower and worse than those of its competitors Telstra and Optus unless it is allowed to merge with TPG, in a document filed with the Federal Court. The statement of claim was the first shot fired in the company’s legal challenge against the Australian Competition and Consumer Commission’s surprise decision this month to block the proposed $15 billion mergers.
Vodafone is the lead applicant in the claim, with TPG the second respondent. Vodafone’s central argument is that without the merger it will not have access to TPG’s radio spectrum and improved access to financial resources, limiting its ability to compete with Optus and Telstra, both of which have considerably more licensed spectrum. The more spectrum a mobile operator has, the less likely it will suffer from congestion and the resulting slower speeds for customers. Vodafone also claims the ban on Huawei equipment in 5G networks will make the upgrade to 5G materially more costly and delay the rollout. Vodafone said the ACCC’s decision would result in its 5G mobile network having a “limited geographic range”.
Fast food giant Domino’s Pizza’s shares slumped to an almost four-year low over fears that slowing growth in sales and store rollouts will see it deliver lower than expected profits over the next two years. Morgan Stanley analyst Thomas Kierath cut his price target for the ASX-listed company’s shares from $50 to $41, and sliced his recommendation to investors from over-weight to equal weight.
Domino’s shares fell 6 percent to $38.26 by 11.30am on Tuesday which is the lowest they have traded since September 2015. The shares were trading as high as $80 in 2016. Mr. Keirath said that after 10 years of strong double-digit growth, Domino’s Australian and New Zealand business was slowing. He said that was “driven by the law of large numbers (finally), competitors catching up with online capabilities, moderating same-store sales growth and new product innovation that lacks the punch of that in prior periods”. “Same-store sales growth has slowed significantly in recent periods, reflecting very strong growth in prior periods and it reaching its potential market share in Australia and New Zealand,” Mr. Keirath said in a note to clients. Domino’s was unlikely to meet its earnings guidance, Mr. Keirath said.
Telstra has announced 6000 redundancies and an additional $200 million in restructuring costs. Telstra brought forward the number of redundancies is expected to announce the next financial year. The telecommunication giant’s total restructuring costs for the 2019 financial year will now come in at $800 million. Costs, which predominantly come from redundancy payments, were non-cash and would not impact on the company’s earnings guidance of between $8.7 billion and $9.4 billion. The actual costs are expected to be felt next financial year when the affected staff leaves the company.
Telstra said after the $800 million ascribed to this year, remaining restructuring costs would be in “the vicinity” of $350 million. “Telstra expects to have announced a reduction of approximately 6000 roles by the end of the financial year,” the telco said in a statement to the Australian stock exchange. It earlier said it was going to cut its workforce by 8000 workers over three years. Telstra also announced a non-cash impairment and write-down of the value of its legacy IT assets by “around $500 million”, as a result of migrating customers onto a new IT platform.
And that’s it for this week. And next week I’ll be talking to Michel van Aalten who is the Country Manager of Australia and New Zealand for Adyen, a leading payments technology company that provides businesses with a single global platform to accept payments anywhere in the world.
And I’ll be talking to economist Nicholas Gruen about the way ahead for the Morrison government’s plans for tax cuts post their shock election win.
And of course, I’ll be bringing you all the week’s news. In the meantime, you can find me on Twitter at talkingbizz, on Facebook and on LinkedIn. And if you want, leave a comment. Have a great week, take care, be good and looking forward to bringing you Talking Business next week.