Friday 31/08/18

1. In MACROECONOMIC NEWS, Argentina’s peso goes down the plughole

2. In VEHICLE-RELATED NEWS, BMW faces Korean scrutiny, Didi Chuxing faces the music and Uber looks to the sky

3. In TELECOMS COMPANY NEWS, China’s ZTE announces its worst ever loss and Vodafone does a big deal in Australia

4. In INDIVIDUAL COMPANY NEWS, Amazon braces itself for the Washington treatment, Apple looks at smart glasses, Grindr looks at a listing and Wonga goes into administration

5. In OTHER NEWS, I warn you about an incredibly annoying song heading your way. For more details, read on…

So Argentina’s having a ‘mare…

In Argentina lifts rates to 60% but fails to bolster currency (The Guardian, Richard Partington) we see that Argentina decided to lift its interest rates by a whopping 15% yesterday to 60% in a bid to arrest the fall of its currency, the Peso. The central bank pledged not to raise it again until December at the earliest.

* SO WHAT? * Argentina was already in a bad situation before the US/Turkey crisis happened, but the resulting fear of contagion in other emerging market countries has accelerated its demise. Argentina’s going to have to take a lot more action in order to restore confidence as I don’t think hiking the interest rate is going to be enough. We’ll have to keep an eye out for further developments.

In vehicle-related news, BMW gets Korean grief, Didi takes action and Uber has its head in the clouds…

It’s all going on with cars at the moment, isn’t it! Well Police raid BMW’s South Korea office in engine fire probe (Financial Times, Song Jung-a) shows that the German purveyors of self-styled ultimate driving machines aren’t immune to accusations of dodgy practices as the Seoul Metropolitan Police Agency has sent 30 investigators to BMW in Seoul to see whether the company hid vehicle defects. This action is in response to 40 BMW vehicles catching fire in South Korea so far this year which has resulted in 20,000 vehicles being banned from the road and 106,000 being recalled from August 20th. The recall covers 42 models produced between 2011 and 2016, but the government’s Transport Ministry has opened a separate broader investigation as BMW buyers have filed a collective lawsuit in Seoul against the company. * SO WHAT? * This is bad news for the luxury car marque and things have got so bad in the country that BMWs are being banned from some public car parks for fear of spontaneously combusting! I know this is going to sound flippant, but I suspect that ultimately complainants will be paid off somehow and this will all be forgotten in time – just look at VW which was responsible for one of the biggest corporate lies in history! It had a bad patch for a while, but it’s now enjoying stellar results! Or what about Samsung and their “exploding” Galaxy Note 7? No doubt BMW will have a rough patch in the short term but I think that the car industry is too important to Germany for it to be savaged too much and actions will no doubt be taken behind the scenes to ensure this all gets swept under the carpet.

Talking about scandal, China puts squeeze on Didi Chuxing after murders (Financial Times, Yuan Yang and Xinning Liu) shows that China’s Uber is in big trouble at the moment because of its involvement in two murders. A 20-year old woman was raped and killed last Friday after

using Hitch, Didi’s carpooling platform. This followed the murder of another woman who used the same service in May. Didi has 550m registered users (wow!) with 30m drivers serving 30m rides per day and Hitch is estimated to account for 10% of Didi’s bookings. Chief exec Cheng Wei and president Jean Liu said that “Didi will stop using scale and growth as our measurement of success. We shall prioritise safety as the single most important performance indicator” but the government has given the company until September to come up with a plan to address its issues and Chen Lin, assistant professor of marketing at China Europe International Business School in Shanghai, observed that although “customers are losing trust in the brand…there is no other better choice besides Didi. You can choose others, but you’d need to pick up the bill”. * SO WHAT? * This is bad for Didi – there’s no getting away from it. The government appears to be letting social media run riot on this as for three days this week “Girl murdered while riding Didi’s Hitch” was in the top ten trending topics on Weibo, the Chinese microblogging site that is a kind of Chinese hybrid between Facebook and Twitter. Although this is not great PR ahead of Didi’s potential IPO next year, there is clearly time for Didi to build that trust again in its brand, although compliance with new mandated behaviours is going to cost Didi money and dent its growth rate in the short term.

Uber shortlists five countries for flying taxi plan to take off (Daily Telegraph, Hasan Chowdbury) heralds the latest development for Uber’s ambitions to launch a fleet of flying taxis by 2023, shortlisting five countries – Japan, France, Brazil, Australia and India – that could host its UberAIR services at some point in the future. This is all part of Uber’s “Elevate” programme which it launched in 2016 and aims to provide “urban aerial ride-sharing” globally. * SO WHAT? * Sounds great, no? I also think that this is a load of rubbish and Uber’s attempt at diverting attention away from its core business. There are enough difficulties getting DRONES in the air, let alone flying taxis! What would you rather do – go somewhere in a driverless car or a flying taxi?? It will cost too much from a tech and regulatory compliance point of view and it is just a massive distraction. I like the idea, but I just don’t think it’s practical. 2023 my *rse. 3023 maybe ;0)

In telco-related news, ZTE’s nightmare continues and Vodafone does a bit of international tidying…

In Dogged by security concerns ZTE posts its worst ever loss of £877m (Daily Telegraph, James Titcomb) we see that the company that almost died because of America banning it – and then changing its mind – has dragged itself out of a deep grave via its fingernails and published some unsurprisingly disastrous numbers for the first half of the year, with revenues falling by 27%. ZTE, the maker of smartphones and telecoms equipment with the Chinese state as its largest shareholder, has been a veritable punching bag this year as various countries have hit it with bans or penalties amidst increasing national security concerns. However, it has managed to get through this via a presidential stay of execution and payment of some massive fines for flouting trading sanctions with Iran and North Korea. * SO WHAT? * ZTE said that it was in recovery mode and that it will return to profitability in the

third quarter this year with production levels normalising in recent weeks but given that Japan and Australia are just the latest countries looking at or actually restricting imports of telecoms equipment from China, I’m not sure how things can really go back to the way they were before. Corporate arrogance doesn’t necessarily pay but then again state backing can go a long way to ensure survival.

Vodafone makes splash in Australia with £8bn merger (The Times, Alex Ralph) takes a look at Vodafone’s £8bn deal to merge its Australian business with Aussie rival TPG Telecom that will combine their mobile and fixed broadband business to create “a powerful challenger to Telstra and Optus”, the other main operators in the country. Vodafone is also looking at completing its merger with Idea, a local rival in the Indian market, by the end of this month. * SO WHAT? * The telco sector often sees M&A like this as companies’ international interests wax and wane, but Vodafone is on a losing streak at the moment with its share price having fallen 28.7% so far this year and I suspect that this deal goes some way towards tidying up their international footprint. There is currently speculation that Elliott Advisors, an American activist investor, is building up a stake in Vodafone with a view to getting a voice and agitating for change so I suspect there will be more to come from Vodafone in the near future.

In individual company news, Amazon braces itself for scrutiny, Apple’s smart glasses could be the Next Big Thing, Grindr eyes a China listing and Wonga is no longa…

Washington to turn heat up on digital giant (The Times, James Dean) takes a look at how Amazon could be under increasing scrutiny from politicians as its power and influence continues to increase. Retailers complain that Amazon is eroding their business whilst simultaneously paying way less in taxes and politicians warn of consumers getting less choice. A series of public hearings is due shortly – the first of their type since 1995 – that will centre on the “identification and analysis of the collusive, exclusionary, and predatory conduct by digital and technology-based platform businesses”. * SO WHAT? * Increased scrutiny was bound to happen – chief exec Jeff Bezos said himself in an interview earlier this year that “Amazon is a large corporation and I expect us to be scrutinised. I think all large institutions should be scrutinised. I think we humans, especially inside democracies, are wired to be sceptical and mindful of large institutions of any kind”. Given that Bezos and Trump don’t get along that well, I suspect that there will be some interesting banter going on. Having said that, Amazon has been pretty impressive in the manner in which it has wended its way into the corridors of power and influence in Washington. Amazon has used 94 lobbyists and $6.9million on lobbying for things like tax, drone flight, and cloud computing for the federal government. Bezos has moved into a plush $23m residence in Washington with neighbours including Ivanka Trump and Jared Kushner, Amazon Web Services (the company’s cloud computing platform) is making increasing amounts of money from US government contracts ($2.8bn is expected this year, rising to $4.8bn next year according to GBH Insights) and Amazon Business (a procurement service for office supplies) is also trying to market itself to government agencies. Amazon will no doubt try to mitigate any accusations of tax dodging and increasing automation of the workforce by pointing to the number of jobs it creates both directly and indirectly as it expands but disgruntled retailers who feel disadvantaged by consistently having to pay more tax than Amazon will want to see the government take some action.

Apple’s deal puts smart glasses in the frame as the next ‘big thing’ (Daily Telegraph, Hannah Boland) highlights Apple’s latest acquisition, Akonia Holographics, which creates displays for augmented reality glasses and says that its technology enables “thin, transparent smart glass

lenses that display vibrant full-colour, wide field-of-view images”. It is thought that Apple’s purchase will help it overcome a common problem – how to make the tech light enough and thin enough to fit inside regular glasses frames so that they can be produced on a commercial scale. Apple’s chief exec Tim Cook believes in Augmented Reality and said that “this is one of those huge things that we’ll look back at and marvel on the start of it”. * SO WHAT? * This sounds genuinely exciting. Although I did feel sorry for Google and the demise of its Google Glass, I just think it was before its time and that if anyone can make “Glassholes” (the unofficial nickname for wearers of Google Glass) cool – it’s Apple with its “iGlasses” (see what I did there).

World’s most popular gay dating app Grindr to go public (Financial Times, Camilla Hodson and Hannah Kuchler) heralds a new era for the world’s most popular app for gay hook-ups as the app that was the forerunner of Tinder and Bumble has signalled its intention to float, although no further details were given on timeframe or listing location. Grindr is based in West Hollywood but is owned by Chinese online games company Beijing Kunlun Tech. In Grindr’s nine years of existence, the app has grown to serve over three million users worldwide. Online dating is currently dominated by Match Group, owned by IAC, which has over 45 dating brands including Tinder, Plenty of Fish and, of course, Match.com but the whole landscape is about to be disrupted by Facebook, which has stated its intention to create its own dating service. Grindr intends to use funds from the IPO to help finance the app’s development and expansion as well as making it more competitive. * SO WHAT? * I think it’s about time! Given that Grindr has really carved out a specialist niche for itself (I recall that the first I heard of it was when Stephen Fry mentioned it on an episode of Top Gear years ago!) you would have thought it would have a decent chance of surviving in an increasingly crowded market. China could also be an interesting market for Grindr as dating apps have exploded in popularity in recent years – with 43% of Chinese nationals having used internet dating, according to YouGov. Chinese social media app Momo acquired dating network Tantan (which has 30 million users) back in February for $760m, so this is clearly a fertile area.

And going from one way of getting ****ed to another, Wonga loses battle for survival (The Times, Harry Wilson) signals the collapse of the much-maligned payday lender as it went into administration. All new lending will be stopped, 500 jobs will be at risk but existing borrowers will still have to pay off their loans. * SO WHAT? * Oh how things have changed since it aimed for a $1bn stock market listing in New York less than ten years ago when it likened itself to companies such as Facebook and Amazon. Wonga subsequently attracted criticism from MPs and campaign groups for its outlandish interest rates (4,000%, anyone??) as well as its unfair debt collection practices. As if that wasn’t bad enough for the company, the FCA put a cap on the interest rates payday lenders were able to charge and they faced mounting complaints of loan mis-selling.

… And finally, in other news…

Regular readers of Watson’s Daily will know that I try as much as possible to stay at the forefront of trends – well here’s a slow-burning trend that is exploding right now in Baby shark takes a bite out of the UK Top 40 charts (bbc.co.uk https://tinyurl.com/ycz6c3yn). If you haven’t heard this already – it’s probably better not to click on this link, but if curiosity just gets the better of you, you know what to do!

As always, thank you for reading Watson’s Daily!