AT&T to acquire Time Warner in $86bn deal

BY Fraser Tennant

“A new company with complementary strengths to lead the next wave of innovation in converging media and communications industry”, is how the $86bn AT&T Inc. acquisition of Time Warner Inc. is being presented to the world.

The definitive agreement that will see the creation of a media-telecom giant is a stock-and-cash transaction valued at $107.50 per share. Time Warner shareholders will receive $53.75 per share in cash and $53.75 per share in AT&T stock.

AT&T expects to achieve $1bn in savings within years of the deal closing.

The combination of AT&T, which has unmatched direct-to-customer distribution across TV, mobile and broadband in the US, mobile in Mexico and TV in Latin America, with Time Warner, a global leader in creating premium content (which owns CNN and HBO), has been positioned to give customers unmatched choice, quality, value and experiences that will define the future of media and communications.

The transaction has been unanimously approved by the boards of directors of both companies.

“This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers,” said Randall Stephenson, AT&T chairman and CEO. “Premium content always wins. It has been true on the big screen, the TV screen and now it’s proving true on the mobile screen. We’ll have the world’s best premium content with the networks to deliver it to every screen.”

The transaction will see Time Warner's vast library of content (which includes film franchises Harry Potter & DC Comics, as well as the Big Bang Theory and Gotham TV series) and ability to create new premium content, with AT&T's extensive customer relationships, world’s largest pay TV subscriber base and leading scale in TV, mobile and broadband distribution.

“This is a great day for Time Warner and its shareholders,” said Jeff Bewkes, chairman and CEO of Time Warner. “Combining with AT&T dramatically accelerates our ability to deliver our great brands and premium content to consumers on a multiplatform basis and to capitalize on the tremendous opportunities created by the growing demand for video content."

Expected to close before year-end 2017, the merger of AT&T and Time Warner is subject to approval by Time Warner Inc. shareholders and a review by the US Department of Justice. 

Bewkes concluded: “My senior management team and I are looking forward to working closely with Randall and our new colleagues as we begin to capture the tremendous opportunities this creates to make our content even more powerful, engaging and valuable for global audiences.”

Since the announcement of the deal, presidential candidates Hilary Clinton and Donald Trump, as well as US lawmakers, have raised queries. Furthermore, it has been announced that a Senate subcommittee will be held in November to consider the transaction.

News: AT&T to pay $85 billion for Time Warner, create telecom-media giant

Poverty levels hit new high as Greek woes continue

BY Fraser Tennant

In a further depressing development for the beleaguered citizens of Greece, new research shows the under pressure European Union (EU) member state as having the highest increase of people finding themselves at risk of poverty or social exclusion, some 800,000 compared to 2008.

According to data compiled annually by Eurostat (the statistical office of the EU) on poverty rates in Europe (EU28), more than one out of three (36 percent) of the Greek population is at risk of poverty and social exclusion – the highest level in the Eurozone. Cyprus is the next closest on 28.9 percent.

The average rate for the EU28 has remained at 23.7 percent between 2008 and 2016.

Additionally, and in what should perhaps be viewed as an unfortunate piece of timing, the Eurostat findings coincide with the International Day for the Eradication of Poverty – an initiative by European decision-makers known as the Europe 2020 strategy which aims to lift 20 million people out of poverty by 2020.  

"Austerity politics have failed in the Eurozone,” is the view of Dimitris Rapidis, a policy and communication advisor at Bridging Europe. “The poverty and social exclusion rate in Greece is worsening, despite the efforts by the government to balance side effects of austerity.

“We have reached a point where even those supporting extreme financial consolidation at the expense of social cohesion and development can no longer convince even the most conservative parts of the European electorate.”

The main challenge facing progressive EU leaders, according to Mr Rapidis, is to address the appeal of far-right parties that seek to capitalise on social grievances, and foster a broader democratic alliance that can deliver a fresh, growth-oriented vision for the EU.

“Broadly speaking, the leaders of the European South that have been direly hit by austerity and financial slowdown - such as Spain, Italy and Cyprus - need to push Brussels and Berlin for change of course in practice and not exhaust their will in statements,” says Rapidis. “The EU and Eurozone have to choose between two distinct options: either gradually collapse under the pressure of nationalism and the far-right or find a way out by reviewing and improving the Stability and Growth Pact so that it can be beneficial for all member-states and leave space for flexible economic policies."

Next up for Greece is a European Council meeting in Brussels on 20 and 21 October, where prime minister Alexis Tsipras will be focusing on the second programme review, as well as attempting to source further debt relief for his embattled country.

News: There is little indication Europe is winning the battle against poverty

Period of ‘prolonged weakness’ for UK

BY Richard Summerfield

Since the UK voted in June to break away from the European Union, the country’s economy has been surprisingly resilient. That durability has made a mockery of the many apocalyptic predictions around Brexit which preceded the vote. Although sterling has tumbled in recent weeks, dropping under $1.21, the UK’s economy has been relatively trouble-free since the summer vote. Indeed, according to the 'EY ITEM Club Autumn Forecast' released this week, the UK’s economy is still expected to grow by 1.9 percent this year, driven by strong consumer spending, which is up by 2.5 percent, and very low inflation of 0.8 percent.

Yet despite of this positive outlook, the report claims that the UK is set for a period of ‘prolonged weakness’, thanks, in part to rapidly increasing inflation which is expected to reach 2.6 percent in 2017, before easing back to 1.8 percent in 2018. Consumer spending, too, is expected to slow to 0.5 percent in 2017 and 0.9 percent in 2018.

Uncertainty surrounding the nature of the UK’s future relationship with the EU is also likely to adversely affect corporate confidence. EY expects business investment to decline by more than 2 percent in 2017, after a drop of 1.5 in 2016.

Peter Spencer, chief economic advisor to the EY ITEM Club, comments: “So far it might look like the economy is taking Brexit in its stride, but this picture is deceptive. Sterling’s shaky performance this month provides a timely reminder that challenges lie ahead. As inflation returns over the winter it will squeeze household incomes and spending. The pressure on consumers and the cautious approach to spending by businesses mean that the UK is facing a period of relatively low growth.”

Though EY’s prediction is worrying, there is a silver lining: the pound’s weakened position is great news for the country’s exporters. Exports are likely to jump 4.5 percent in 2017 and 5.6 percent in 2018, according to the report. The resiliency of the export space is contingent, however, on the nature of the UK’s future relationship with the EU. Given that 45 percent of the country’s exports are to the EU, a ‘hard Brexit’ may spell trouble for the UK’s export industry.

Report: EY ITEM Club Autumn Forecast

Note fiasco sends Samsung profit up in smoke

BY Richard Summerfield

The smartphone industry is a fast moving and fickle market. As Samsung Electronics well knows, a company’s fortunes can rise and fall on the strength of a single device. When the company released its Galaxy S7 line of phones earlier this year, Samsung recorded its strongest profits in over two years.

In July, revenue of $45.2bn was up 5 percent on the previous year, while the firm’s operating profit was up 18 percent to $7.22bn.

However, as quickly as things can improve, they can fall apart. The debacle surrounding the release, replacement and subsequent recall of its Galaxy Note 7 device has plunged the company’s brand and reputation into chaos. Indeed, the furore surrounding Samsung’s exploding ‘phablet’ could not have come at a worse time for the South Korean firm, with major rivals Google and Apple launching competing devices in the last few weeks. It appears that Samsung’s brand and balance sheet may be adversely affected, contrary to what the company originally claimed.

Just last week, Samsung issued earnings guidance which claimed that the company’s recall of the device would not adversely impact its balance sheet. However, on Wednesday it said it expects third quarter profits of $4.7bn or 5.2 trillion won, around a third lower than its original estimate of 7.8 trillion won. The company has also dramatically reduced revenue expectations, cutting them by 2 trillion won to 47 trillion ($41.8bn).

Samsung also noted that in light of the difficulties it has had with the Note 7 device, it was stopping all sales and production of the phablet, citing consumer safety concerns. “For the benefit of consumers' safety, we have stopped sales and exchanges of the Galaxy Note 7 and have consequently decided to stop production," Samsung said in a statement.

The day before the company made the announcement, Samsung saw $18bn wiped off its market capitalisation. The following day the company’s shares continued to fall. How Samsung recovers from here will be telling. Undoubtedly, the momentum the firm built up through the release of the Galaxy S7 device has slowed considerably.

News: Samsung slashes profit forecast over Galaxy Note 7 crisis

The danger within: internal risks increasing, claims new PwC report

BY Fraser Tennant

Amid a complex and constantly changing risk landscape, internal cyber attacks are an increasing threat that can damage a company’s profits and reputation, according to PwC’s ‘Global State of Information Security Survey’, published this week.

Indeed, a multitude of data is lost each day in this way through mistakes, misuse or malicious attacks; however, the PwC survey contends that the threat to an organisation no longer comes purely from outsiders and that insider risk is now a matter of growing concern.

Drilling down, the top insider risk and source of security incidents for UK organisations is current employees, with former employees a close second. In addition, third parties, including service providers, consultants or contractors, are also now increasingly likely to be the cause of a cyber threat to a business.

In light of the reconfigured threat, the survey highlights four key trends: (i) digital businesses are adopting new technologies and approaches to cyber security; (ii) threat intelligence and information sharing have become business-critical; (iii) organisations are addressing risks associated with the internet of things (IoT); and (iv) geopolitical threats are rising.

“Organisations spend so much time focusing on protecting themselves from external threats that it’s often easy to forget the insider risk – stemming not only from employees, but also a wider ecosystem of business partners," said Richard Horne, cyber security partner at PwC. “Business leaders need to shine a light on who has access to their critical systems and data. Poor access governance and controls can damage not only your reputation but ultimately profit.”

The report also examines the likely impact of the EU’s General Data Protection Regulation (GDPR), which is due to come into effect in April 2018. In essence, the GDPR means an uptick in privacy demands that will require companies to refocus their data privacy arrangements.

“GDPR requires a level of internal control over privacy practices we’ve never seen before,” said Jay Cline, cyber security and privacy principal at PwC. “A half-billion EU citizens will be poised to hold multinationals accountable to this higher bar through new rights they will begin exercising one spring morning a year and a half from now.”

The ‘Global State of Information Security Survey’ showcases the views of more than 10,000 CEOs, CFOs, CIOs, CISOs, CSOs, VPs and directors of IT and security practices from more than 133 countries (34 percent of respondents are from North America, 31 percent from Europe, 20 percent from Asia Pacific, 13 percent from South America and 3 percent from the Middle East and Africa).

Report: Moving forward with cybersecurity and privacy - Key findings from The Global State of Information Security® Survey 2017