WEBVTT - How Avis-Waymo and Hertz-Apple Partnerships Affect Driverless Future 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.120 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. There 0:00:32.240 --> 0:00:35.599 is a slew of stories PIM about rental car companies 0:00:35.680 --> 0:00:40.680 teaming up with big tele technology companies to manage their 0:00:40.800 --> 0:00:44.120 driver lists car fleets. And I thought this was fascinating. 0:00:44.200 --> 0:00:48.520 So let's bring in chrys Chrysler minivans. Maybe they'll even 0:00:48.520 --> 0:00:51.280 put another badge on at Alphabet and their way Mo 0:00:51.520 --> 0:00:54.040 autonomous driving division. Yeah, I want to I want to 0:00:54.040 --> 0:00:55.720 get more context in this because it seems like a 0:00:55.720 --> 0:00:59.280 pretty big significant development. I want to bring in Allen Baum, 0:00:59.440 --> 0:01:01.680 principal at UM and associates, as well as our own 0:01:01.720 --> 0:01:06.119 a non street Astavan senior semiconductor and hardware analysts at 0:01:06.160 --> 0:01:10.200 Bloomberg Intelligence, and I want to start with you UM. Yesterday, 0:01:10.360 --> 0:01:14.679 what was so significant that two agreements were reported? We 0:01:14.760 --> 0:01:19.319 had Avis coming up with something with Weymo to possibly 0:01:19.360 --> 0:01:22.040 manage their driver list a fleet, and then Apple and 0:01:22.120 --> 0:01:24.679 Hurts appear to be discussing some kind of similar partnership. 0:01:24.760 --> 0:01:28.080 Why now and what what really are these partnerships? Look, 0:01:28.080 --> 0:01:30.360 at the end of the day, these are complicated electro 0:01:30.400 --> 0:01:33.399 mechanical machines. I think that technology companies have figured out 0:01:33.480 --> 0:01:36.920 that they need to be um partnering with somebody who 0:01:36.959 --> 0:01:41.280 has substantial experience in the vehicle department. So as much 0:01:41.319 --> 0:01:43.880 as driver list technical that would be a good thing. 0:01:44.040 --> 0:01:46.200 That would be a good thing because they take space. 0:01:46.400 --> 0:01:50.440 You need to do some maintenance maintenance, whether it's an 0:01:50.440 --> 0:01:54.160 electric vehicle fleet or a fuel injection vehicle. You need 0:01:54.280 --> 0:01:57.680 regular checkups on everything from tires to fluid levels to 0:01:58.400 --> 0:02:02.160 batteries for example. And you just can't automate the whole thing, 0:02:02.240 --> 0:02:06.120 just like you do with the server farm or a 0:02:06.200 --> 0:02:09.000 phone so much to the annoyance of people in the 0:02:09.040 --> 0:02:12.960 technology industry significantly, so you can't. You can't put it 0:02:12.960 --> 0:02:15.840 in the cloud and forget about it. So so this 0:02:15.919 --> 0:02:18.080 is that part of that. This is a messy part 0:02:18.120 --> 0:02:21.280 of the hardware that needs to be taken care of. Well, Ellen, 0:02:21.320 --> 0:02:23.680 I want to bring you in here are Hurts and 0:02:23.760 --> 0:02:27.480 Eva's equipped to really manage a fleet like this. This 0:02:27.560 --> 0:02:30.960 isn't exactly their business. Well, they're not going to be 0:02:31.000 --> 0:02:35.240 managing the technology. They actually made pretty clear that the 0:02:35.600 --> 0:02:39.960 WEYMO will be responsible for making sure about the hardware 0:02:39.960 --> 0:02:44.160 and the software of the autonomous vehicle uh is functional. 0:02:44.639 --> 0:02:48.280 But it's also about distribution. Uh you know the idea. 0:02:48.560 --> 0:02:52.800 There's been a lot of surveys about how people view this, 0:02:53.000 --> 0:02:56.160 how the general public views it, and it's generally pretty negative. 0:02:56.200 --> 0:02:59.200 And the obvious reason is people don't know what they 0:02:59.240 --> 0:03:02.320 don't know. Um and so you know, this sounds pretty 0:03:02.320 --> 0:03:06.079 creepy that your car driving your driving itself, and uh 0:03:06.400 --> 0:03:10.240 so that there's a concern about that. With distribution, as 0:03:10.280 --> 0:03:14.560 people start to to experience it, then perhaps their their 0:03:14.639 --> 0:03:17.840 views will become more positive. And so that's what this 0:03:17.960 --> 0:03:21.680 is about. And this is also a very good I 0:03:21.680 --> 0:03:24.919 think for the electric vehicle industry because what it it, uh, 0:03:24.960 --> 0:03:28.120 it's it's an example of is when you talk about 0:03:28.160 --> 0:03:31.960 a HURTS and an AVIS being involved, the cost of 0:03:32.520 --> 0:03:36.920 the service, of of providing the services critical and so 0:03:37.120 --> 0:03:39.600 to the extent that electric vehicles are going to be 0:03:39.720 --> 0:03:43.200 cheaper to run, I'm not really talking about cheaper to buy, 0:03:43.320 --> 0:03:48.880 but cheaper to run than that's critical for these these opportunities. 0:03:49.200 --> 0:03:53.000 And so we see the players that are good at this, 0:03:53.240 --> 0:03:57.160 that are good at running fleets getting more involved. So 0:03:57.280 --> 0:04:00.480 is this as much a recognition that the business model 0:04:00.800 --> 0:04:06.760 of rental car companies such as Budget and Avis, Budget 0:04:06.880 --> 0:04:13.000 and Hurts Global, that their business model aligns financially with 0:04:13.320 --> 0:04:18.920 the ownership and maintenance portion of these vehicles future Because 0:04:19.040 --> 0:04:21.800 it's about scale, as you said on them, absolutely see 0:04:21.839 --> 0:04:26.000 economic scale and technology is sort of the foundation of 0:04:26.040 --> 0:04:31.560 which large technology shifts occur. Right, So to Mr Brown's point, 0:04:31.560 --> 0:04:34.040 it's a great distribution channel. They know how to run 0:04:34.080 --> 0:04:35.919 and operate cars, and they know how to run and 0:04:35.960 --> 0:04:39.400 operate cars cheaply so and appreciate the value of those 0:04:39.400 --> 0:04:43.359 cars the benefit of their shareholders exactly. And this allows 0:04:43.560 --> 0:04:49.039 technology to proliferate through their fleet better, faster, more effectively. 0:04:49.080 --> 0:04:52.080 That's point number one. The point number two is if 0:04:52.080 --> 0:04:54.760 you look at drivertive technology enhancements, one of the things 0:04:54.760 --> 0:04:57.760 that we have written about extensively is this notion of 0:04:58.279 --> 0:05:02.720 collecting data from UH many many, many number of points. 0:05:02.760 --> 0:05:07.039 This is one industry which needs a large amount of 0:05:07.120 --> 0:05:10.720 vehicles flying on the road to gather information. Who better 0:05:10.800 --> 0:05:13.360 do it from rather than than doing it one by 0:05:13.400 --> 0:05:17.440 one by one on an ownership basis renting of cars. Well, 0:05:18.279 --> 0:05:20.839 and this raises a question. This raises my next question, Alan, 0:05:20.880 --> 0:05:23.919 I want to direct this at you. The significance of 0:05:23.960 --> 0:05:27.320 this is it that we're getting closer to the reality 0:05:27.400 --> 0:05:32.159 of a self driving fleet that will actually get implemented 0:05:32.279 --> 0:05:34.840 in urban areas or elsewhere. I mean, are we really 0:05:35.040 --> 0:05:36.719 see are we at the precipice of a sort of 0:05:36.760 --> 0:05:44.240 see change in transportation. I'm a little uh cautious on that. Uh, 0:05:44.279 --> 0:05:47.400 you know, will this work in Manhattan? Will this work 0:05:47.440 --> 0:05:52.159 in San Francisco? Yes? Um, but of course it has 0:05:52.200 --> 0:05:55.360 to compete with the existing system well well, but beyond 0:05:55.440 --> 0:05:59.080 beyond but sorry, Alan, but beyond just will it work? 0:05:59.480 --> 0:06:01.920 I mean, is it going to be experimented with at 0:06:01.960 --> 0:06:03.880 this point? Is that the Is that the significance or not? 0:06:03.920 --> 0:06:06.080 You want to take that? Yeah, I think that. I 0:06:06.680 --> 0:06:09.240 don't know if it's Manhattan or San Francisco urban areas 0:06:09.279 --> 0:06:11.479 as much as it's going to I think start with 0:06:11.760 --> 0:06:17.320 UM large fleets of trucks. It's going to start with closed, compartmentalized, 0:06:17.440 --> 0:06:20.560 UM sort of gated communities if you may, whether it's 0:06:20.560 --> 0:06:23.480 a campus network, whether it's universities. One of the things 0:06:23.480 --> 0:06:26.919 that we've said is university campuses may be ideal for 0:06:26.960 --> 0:06:29.880 an experimentation with that, and particularly on the West Coast, 0:06:29.960 --> 0:06:35.720 large urban or suburban corporate campuses would be ideal for 0:06:35.720 --> 0:06:39.839 such a fleet where, um, you could experiment with the vehicles, 0:06:39.839 --> 0:06:42.679 you could experiment with buses, you could experiment with cars. 0:06:43.320 --> 0:06:45.640 But at the end of the day, you also need 0:06:46.320 --> 0:06:49.080 urban data. You also need data from different parts that 0:06:49.120 --> 0:06:51.359 you need rural data. You need data from all of 0:06:51.360 --> 0:06:55.400 these different parts. And I think that I'm not so sure. 0:06:55.440 --> 0:06:59.279 I agree with with Mr round in that I don't 0:06:59.320 --> 0:07:02.680 know if it's to come sooner or later. But I 0:07:02.720 --> 0:07:06.240 think that this is we're going to try multiple different things. 0:07:06.320 --> 0:07:09.200 I think the experimentation with the rental car companies is 0:07:09.240 --> 0:07:11.880 a great idea. I think that we might start with 0:07:11.920 --> 0:07:16.240 the universities, corporate campuses, etcetera. We have to experiment in 0:07:16.360 --> 0:07:19.720 order to collect this data to make this feasible. Alan 0:07:19.760 --> 0:07:24.000 bound you have a response. The development process is growing 0:07:24.040 --> 0:07:27.560 at at an amazing rate. I mean literally, it's two 0:07:27.640 --> 0:07:32.120 or three items a week, um and yesterday two items 0:07:32.160 --> 0:07:36.080 in one day where there are all these collections of 0:07:36.320 --> 0:07:40.160 major players, both in the technology and the auto space 0:07:40.240 --> 0:07:46.040 and now in distribution. Um, so we're seeing dramatic opportunities. Obviously, 0:07:46.120 --> 0:07:49.440 not everything is gonna work, and that's what the system 0:07:49.520 --> 0:07:52.960 is finding. I just saw a video of Tesla's new 0:07:53.000 --> 0:07:56.760 autopilot where it was for about a twenty minute space 0:07:57.040 --> 0:07:59.080 of where it did and did not work. But of 0:07:59.120 --> 0:08:02.120 course in restless case, they're getting one a non to 0:08:02.200 --> 0:08:05.560 saying that data. They get the data, whether you're using 0:08:05.600 --> 0:08:09.240 autopilot or not, and that data is critical to the 0:08:09.280 --> 0:08:13.160 development of the technology. And of course we've also got 0:08:13.160 --> 0:08:16.880 the regulatory issue, which is actually being discussed in Washington today, 0:08:17.760 --> 0:08:21.440 where the auto companies and the technology companies are saying, 0:08:21.440 --> 0:08:27.040 we really don't want fifty states having different different policies 0:08:27.080 --> 0:08:29.280 about this, Thanks very much. We gotta leave it there, 0:08:29.280 --> 0:08:33.040 we gotta run Alan bound Principal Bauman associates on trin 0:08:33.120 --> 0:08:36.080 of US and Bloomberg Intelligence. Just type b I go 0:08:36.240 --> 0:08:50.600 on the Bloomberg for more. Well, I am a little 0:08:50.640 --> 0:08:54.600 bit perhaps confused about one issue in the exchange traded 0:08:54.640 --> 0:09:01.120 fund universe that only one all right, fairy fam but 0:09:01.400 --> 0:09:04.480 this has been the fastest growing aspect of the asset 0:09:04.480 --> 0:09:09.280 management industry, and it is now an increasingly actively managed 0:09:09.320 --> 0:09:12.000 industry because you have the passive e t F which 0:09:12.000 --> 0:09:13.920 account for the majority of the ass under management, but 0:09:13.960 --> 0:09:16.480 there is the fastest growing component that is smart beta. 0:09:16.559 --> 0:09:19.280 To understand how actively managed e t f s fit 0:09:19.400 --> 0:09:22.640 into this this universe it's known for being passive. I 0:09:22.640 --> 0:09:25.079 want to bring in Tom Hoops, executive vice president, a 0:09:25.160 --> 0:09:29.760 head of business development. Uh like Mason, really glad to 0:09:29.800 --> 0:09:32.040 have you here, Thank you so much, thanks for having so. 0:09:32.120 --> 0:09:35.280 Can you explain where actively managed e t f s 0:09:35.360 --> 0:09:38.840 fit in to a universe that has gained popularity for 0:09:38.920 --> 0:09:42.840 being passive and cheap. Yeah. Sure. I think it starts 0:09:42.880 --> 0:09:45.520 with thinking about the e t F as a vehicle 0:09:45.679 --> 0:09:48.520 as opposed to an investment strategy and separating that. I 0:09:48.520 --> 0:09:51.680 think the industry and the media often we get it wrong. 0:09:51.760 --> 0:09:54.280 We think about e t f s and market cap 0:09:54.320 --> 0:09:57.880 passive as being synonymous and true, most of the volume 0:09:57.920 --> 0:10:00.400 that's been in e t f s today has been 0:10:00.480 --> 0:10:03.640 in market cap passive. But ultimately the e t F 0:10:03.760 --> 0:10:07.760 is just a delivery vehicle for an investment strategy. Yes, 0:10:07.880 --> 0:10:10.920 although part of the beauty of the e t F 0:10:11.240 --> 0:10:14.360 is its transparency, which doesn't always work with an actively 0:10:14.360 --> 0:10:18.000 managed fund, particularly in less liquid areas right um, as 0:10:18.040 --> 0:10:21.360 well as it's ease of transaction. So it's sort of 0:10:21.640 --> 0:10:23.559 uh is supposed to be a proxy for a broad 0:10:23.640 --> 0:10:26.160 market that you can just easily access, right it doesn't 0:10:26.160 --> 0:10:27.640 have to be a proxy for a broad market. I 0:10:27.720 --> 0:10:29.960 do think that the ease of access is important. I 0:10:30.000 --> 0:10:33.040 think transparency has been an issue and that is is 0:10:33.080 --> 0:10:37.640 a potentially a roadblock to broader adoption of delivering active 0:10:37.640 --> 0:10:40.160 strategies UM in an e t F. But it also 0:10:40.200 --> 0:10:43.400 has lower overall operating expenses and gives clients a better 0:10:43.440 --> 0:10:46.560 tax outcome. So as a rapper, it's it's in many 0:10:46.559 --> 0:10:49.520 ways a better mouse trap than the forty Act mutual fund. 0:10:49.559 --> 0:10:52.760 And so you know, for clients and advisors and gatekeepers 0:10:52.760 --> 0:10:56.360 that want to access active strategies, which they still do 0:10:56.960 --> 0:10:59.880 in large numbers, having it in a more efficient, lower 0:11:00.120 --> 0:11:03.600 US tax friendly rapper we think just makes sense. Does 0:11:03.640 --> 0:11:05.200 this also have to do with the way that the 0:11:05.240 --> 0:11:07.920 financial industry has evolved in the sense that if you 0:11:07.960 --> 0:11:10.400 are a great money manager, you can go out and 0:11:10.440 --> 0:11:13.040 create your own mutual fund and then people will want 0:11:13.080 --> 0:11:16.600 to invest based on your ability to produce the returns 0:11:16.679 --> 0:11:19.720 or the risk profile that they want. On the other hand, 0:11:19.760 --> 0:11:22.240 with an exchange traded fund, it seems to be the 0:11:22.360 --> 0:11:28.800 vehicle that is run by the larger financial institution based 0:11:28.880 --> 0:11:33.520 upon a desire obviously to market the investment, but also 0:11:33.840 --> 0:11:36.360 to take advantage of whatever the strengths are of your 0:11:36.400 --> 0:11:40.080 financial institution. Yes, so so him. Our Our strategy, like Mason, 0:11:40.120 --> 0:11:44.640 has been to increase client choice in both investment strategies 0:11:44.679 --> 0:11:47.719 and in products and vehicles. And so getting the right 0:11:47.840 --> 0:11:50.240 investment strategy in front of a client or in a 0:11:50.280 --> 0:11:53.360 client's portfolio is most important if they want to access 0:11:53.400 --> 0:11:57.080 that strategy through a mutual fund, through separately managed account, 0:11:57.240 --> 0:11:59.760 through an et F, through collective fund, through use it's fund, 0:11:59.760 --> 0:12:01.839 its R That's that's all fine. We want to be 0:12:01.880 --> 0:12:05.439 able to offer them that choice. Which asset classes are 0:12:05.480 --> 0:12:11.520 most uh conducive to active management management in ETF wrapper? 0:12:11.600 --> 0:12:13.160 I mean, what are you looking at to sort of 0:12:13.200 --> 0:12:16.440 expanding sure, sure so so So Back to the transparency 0:12:16.480 --> 0:12:18.360 issue is, as you know, the E t F vehicle 0:12:18.760 --> 0:12:23.400 UM as it stands today does require UM daily transparency. UM. 0:12:23.440 --> 0:12:26.520 We're certainly fine with daily transparency with clients or the 0:12:26.559 --> 0:12:30.000 second largest SMA provider UM in the in the US, 0:12:30.120 --> 0:12:32.920 and that means we provide, of course a daily transparency 0:12:32.960 --> 0:12:35.080 to our clients, but with an e t F, it's 0:12:35.160 --> 0:12:38.080 daily transparency to the market and market makers, and that 0:12:38.160 --> 0:12:40.960 can of time put your IP at risk for front 0:12:41.040 --> 0:12:43.680 running UM and and other things that could be detrimental 0:12:43.720 --> 0:12:46.160 to the client. That is less of an issue in 0:12:46.240 --> 0:12:49.880 fixed income, and that's why you've seen to date the 0:12:49.960 --> 0:12:53.160 largest active ETFs have been in the fixed income space. 0:12:53.200 --> 0:12:55.960 It's harder to front run and get ahead of of 0:12:55.960 --> 0:12:59.240 of fixed income securities and fixed income portfolios. On the 0:12:59.240 --> 0:13:02.280 equity side, though, that is where I think the market 0:13:02.320 --> 0:13:05.520 is looking for some type of technology or solution to 0:13:05.679 --> 0:13:08.600 deal with the transparency issue so that we can deliver 0:13:08.960 --> 0:13:12.280 actively manage equity strategies UM in the advantages of the 0:13:12.280 --> 0:13:15.520 E t F vehicle. Let's talk, if you can, about 0:13:16.040 --> 0:13:19.440 some of the results from a recent survey. This is 0:13:19.480 --> 0:13:23.040 the fifth annual survey. I believe that you've uh that 0:13:23.120 --> 0:13:26.679 your reference and it has to do with the attitudes 0:13:26.720 --> 0:13:28.920 of investors, and I thought it was very interesting that 0:13:28.960 --> 0:13:34.280 your your expectations for certain levels of return are almost 0:13:34.360 --> 0:13:39.880 determined by your age and what you do. Yeah, I 0:13:39.920 --> 0:13:42.120 think I think them. There were a lot of interesting 0:13:42.679 --> 0:13:45.800 results or eye opening results when it came to investor 0:13:45.920 --> 0:13:51.119 expectations versus versus reality, and it did vary some by generation, 0:13:51.800 --> 0:13:55.240 varied some by whether one was was employed currently or retired. 0:13:55.640 --> 0:13:57.800 At the end of the day, though there is still 0:13:57.920 --> 0:14:02.440 a pretty sizeable gap between investors think they're gonna earn, 0:14:02.480 --> 0:14:06.320 particularly in in income oriented investments, versus where we think 0:14:06.360 --> 0:14:08.640 the world is now and where it will be going forward. Well, 0:14:08.840 --> 0:14:11.880 it just said that the numbers fully retired. If you're 0:14:11.880 --> 0:14:15.840 fully retired, you're looking at overall average rate of return 0:14:15.880 --> 0:14:18.439 of six point two percent, which is a lot more 0:14:18.480 --> 0:14:23.440 realistic than the nine percent that people who are employed 0:14:23.560 --> 0:14:27.000 are sting. They're more uh, they're okay with investing in 0:14:27.080 --> 0:14:30.120 safer assets that they can get a more predictable returns. 0:14:30.160 --> 0:14:32.520 They might just be also de risking, right, or maybe 0:14:32.520 --> 0:14:35.160 they just have everything they need. I'm sure the more 0:14:35.200 --> 0:14:38.400 realistic they're older too. We we have seen again it's 0:14:38.440 --> 0:14:41.520 persisted now for a few years in the survey, a 0:14:41.640 --> 0:14:48.920 large allocation to cash um across all generations in the range. Wow, 0:14:49.000 --> 0:14:50.880 all right, that's something to watch and thank you very 0:14:50.960 --> 0:14:53.520 much for being with us. Tom Hoops is executive vice 0:14:53.560 --> 0:15:10.200 president and head of business development leg Mason based in Baltimore. Well, 0:15:10.240 --> 0:15:13.160 we've all been adding up our cable and our mobile 0:15:13.160 --> 0:15:15.760 phone bills here in the studio, and the number is 0:15:15.800 --> 0:15:18.720 not pleasant. Here to help us understand it and the 0:15:18.760 --> 0:15:22.840 possible combination between Sprint and Charter and Comcast as Bloomberg 0:15:22.880 --> 0:15:25.880 Intelligence his own Josh Yatsko wits he is a media 0:15:25.960 --> 0:15:29.200 and cable analyst, and Matthew Cantererman he is a telecom 0:15:29.320 --> 0:15:32.280 services as well as equipment analysts, and they join us 0:15:32.280 --> 0:15:35.200 in our studios. Gentlemen, thanks for being here. I'm not 0:15:35.240 --> 0:15:38.040 gonna make you reveal your cable bills or you know 0:15:38.040 --> 0:15:39.920 how much it costs for your mobile service, but we 0:15:39.920 --> 0:15:43.920 were informally talking and realizing, my goodness, we're supporting you know, 0:15:43.960 --> 0:15:47.520 at least three behemoth organizations. I want you to talk 0:15:47.560 --> 0:15:51.840 about some of them, Sprint, Comcast and Charter. H Matthew, 0:15:51.840 --> 0:15:54.440 maybe you want to start off by describing what do 0:15:54.480 --> 0:15:57.080 you think is going on here? Sure says say Sprint 0:15:57.120 --> 0:15:59.520 for a while as underinvested in its network, they've been 0:15:59.520 --> 0:16:02.240 concentrated aim by very high leverage, low free cash flow, 0:16:02.320 --> 0:16:05.400 so they're looking for ways to finance network investments UM 0:16:05.560 --> 0:16:07.280 to catch up to their rivals A, T and T, 0:16:07.520 --> 0:16:09.960 Verizon and Tea Mobile has been the most aggressive recently. 0:16:10.680 --> 0:16:14.040 UM an equity investment from the cable companies who Josh 0:16:14.120 --> 0:16:16.440 can speak to about their desire to get into wireless 0:16:16.720 --> 0:16:19.760 and offer quadruple play bundles to reduce their turn You know, 0:16:20.080 --> 0:16:22.280 it suits all parties. It helps Sprint get cash to 0:16:22.360 --> 0:16:25.560 accelerate their capex, and it helps the cable companies, you know, 0:16:25.640 --> 0:16:28.600 get good, cheap access to the wireless airways that they 0:16:28.640 --> 0:16:32.480 need to to lease to to offer those services. So, Josh, 0:16:32.600 --> 0:16:35.360 let's bring you in how how beneficial is it for 0:16:35.520 --> 0:16:39.680 Comcast and Charter Because theoretically, as Matt saying, you know, 0:16:39.720 --> 0:16:42.160 it does sound like there is some kind of benefit. 0:16:42.200 --> 0:16:43.640 And yet when you look at the share prices of 0:16:43.720 --> 0:16:46.480 both Comcast and Charter both down. Sprint though, is up 0:16:46.520 --> 0:16:49.960 because investors are loving the idea of a possible bailout 0:16:50.120 --> 0:16:54.200 or extra cash. Yeah, so Charter and Comcast have actually 0:16:54.280 --> 0:16:57.400 been having wireless ambitions for a while. Right now they 0:16:57.480 --> 0:16:59.640 have a deal with Verizon and MV and O deal 0:16:59.640 --> 0:17:03.480 where they can utilize the services. MBNO, you've gotta help 0:17:03.560 --> 0:17:06.560 us m vyn O. It's basically a way for them 0:17:06.560 --> 0:17:09.440 to utilize Verizon services without owning the network. So they're 0:17:09.520 --> 0:17:13.640 using it as a wholesale agreement. UM. So with Sprint, 0:17:13.840 --> 0:17:15.879 they could look into multiple options, one of which is 0:17:15.920 --> 0:17:18.800 doing another mv and O type agreement with Sprint, maybe 0:17:18.800 --> 0:17:22.360 getting better deal terms, or actually going out and buying Sprint. 0:17:22.840 --> 0:17:24.879 We tend to think that an MBNO is more likely 0:17:25.200 --> 0:17:27.560 that Comcast and Trotter are going at this little slow 0:17:27.840 --> 0:17:31.199 We want to test the waters and also maybe help Sprint, 0:17:31.280 --> 0:17:34.240 as Matt said, Jack some cash and see where the 0:17:34.320 --> 0:17:37.040 network goes. Just real quick, how much money is at stake? 0:17:37.080 --> 0:17:40.280 I mean these MVNO is, these these agreements to use 0:17:40.440 --> 0:17:44.080 the wireless network that Sprint has. How much would a 0:17:44.080 --> 0:17:47.520 Comcast or try to pay for that? The deal terms 0:17:47.520 --> 0:17:50.560 are not disclosed. I don't know if um Matt hasn't anything. 0:17:50.600 --> 0:17:53.479 But you saw what Comcast is charging its customers, and 0:17:53.760 --> 0:17:56.800 it's utils utilizing its WiFi network which has sixteen million 0:17:56.800 --> 0:17:58.600 hot spots, so they can offload a lot of that 0:17:59.000 --> 0:18:01.160 data traffic onto the why find network. We do still 0:18:01.160 --> 0:18:03.320 overall costs from the NBN oh, and actually get a 0:18:03.960 --> 0:18:07.680 positive return on that. Matthew, I want to know about Sprint. 0:18:07.760 --> 0:18:09.719 I mean, do they need this deal? I mean they 0:18:09.760 --> 0:18:12.920 need the cash, don't they. It seems like Massa needs 0:18:12.920 --> 0:18:14.800 a deal because he's been trying to sell Sprint for 0:18:14.840 --> 0:18:17.520 a while now. He's talked to Team Mobile, Joy, to Telecom, 0:18:17.520 --> 0:18:19.920 the cable companies, He's talking to everybody. He talked to 0:18:19.960 --> 0:18:22.480 Charlie Ergan shopping it around. He's shopping it around. Is 0:18:22.520 --> 0:18:24.440 that the is that? Does that make sense? I mean, 0:18:24.520 --> 0:18:27.520 is that you know it's sort of you're shopping something 0:18:27.560 --> 0:18:30.640 around that must make it difficult to gain any kind 0:18:30.640 --> 0:18:33.720 of leverage in any kind of It does. But but 0:18:33.800 --> 0:18:35.320 you know, he put a lot of money into it 0:18:35.160 --> 0:18:37.320 and it didn't work out the way he wanted. You know, 0:18:37.440 --> 0:18:40.320 Sprint's been unable to leverage the vast spectrum massets they 0:18:40.320 --> 0:18:43.639 have for all the reasons I said before. Um, you know, 0:18:43.720 --> 0:18:45.800 that's the value he saw and they've been unable to 0:18:45.800 --> 0:18:48.960 monetize that for him. So he's looking at ways to 0:18:48.640 --> 0:18:51.240 to monetize his investment that he made in the company 0:18:51.240 --> 0:18:53.400 a few years ago. Being the head of soft Bank 0:18:53.440 --> 0:18:56.639 which on Sprint right exactly, sorry, and so UM, you 0:18:56.680 --> 0:18:59.240 know what what he would you know, by shopping around. 0:18:59.240 --> 0:19:01.280 He's trying to find the best deal. And you know, 0:19:01.359 --> 0:19:03.399 aside from just getting cash, I think one of the 0:19:03.480 --> 0:19:07.159 key assets the cable companies have is the deep fiber 0:19:07.200 --> 0:19:09.800 and collaxial cable networks and in the neighborhoods if you 0:19:09.800 --> 0:19:12.359 think about, you know, particularly in the suburbs and the 0:19:12.560 --> 0:19:15.120 in the rural areas where they are the only provider 0:19:15.200 --> 0:19:17.760 or one of two providers of those services deep into 0:19:17.800 --> 0:19:20.320 the neighborhoods. Um, you know, Sprint can just stick up 0:19:20.359 --> 0:19:24.000 small cells on top of those and you know, very cheaply. UM, 0:19:24.040 --> 0:19:26.600 you know, expand the quality and the coverage of its 0:19:26.600 --> 0:19:29.760 network and really become competitive with the likes of Horizon, A, 0:19:29.840 --> 0:19:32.440 T and T and T Mobile. I want to ask 0:19:32.480 --> 0:19:35.919 about whether this is anti competitive or would this trip 0:19:36.000 --> 0:19:42.280 any anti competitive wires. Josh, it shouldn't because wireless UM, 0:19:42.440 --> 0:19:46.840 the wireless services that Sprint offers are complimentary more to 0:19:47.200 --> 0:19:50.840 the wireline services that UM, Comcast and Trotter offer. It's 0:19:50.880 --> 0:19:54.520 not taking away competitor in that space, unless you argue 0:19:54.600 --> 0:19:57.760 that the wireless services could actually compete head to head 0:19:57.920 --> 0:20:00.720 with UM the wireline services woul we don't actually see 0:20:00.720 --> 0:20:02.679 in the market yet. You know, you've potentially seen that 0:20:02.720 --> 0:20:05.520 with five G on on the last mile UM, with 0:20:05.920 --> 0:20:09.439 wireless companies coming in and using back haul and a 0:20:09.440 --> 0:20:12.840 five G basis, But this is years out potentially, Matthew, 0:20:12.880 --> 0:20:15.200 what is your thought and maybe just reference Verizon and 0:20:15.240 --> 0:20:18.320 its files product because that is trying to do the 0:20:18.359 --> 0:20:21.760 triple play bundle. So triple plays are very popular in 0:20:21.800 --> 0:20:23.840 the US, but we haven't taken the step like a 0:20:23.840 --> 0:20:29.240 lot of the internet, home phone, and and TV services UM, 0:20:29.280 --> 0:20:31.760 but we haven't taken the step to quadruple plays, which 0:20:31.760 --> 0:20:34.080 bundle mobile services and they're like a lot of European 0:20:34.119 --> 0:20:36.280 countries have. I think one of the issues is the 0:20:36.280 --> 0:20:40.680 geographic constraints. We don't have national fixed line providers. Comcast 0:20:40.720 --> 0:20:44.520 isn't national, Charter isn't national, Files isn't national, whereas in 0:20:44.560 --> 0:20:47.520 France or the Netherlands, much smaller countries it's easier to 0:20:47.560 --> 0:20:50.720 have a national footprint UM and so you know, the 0:20:50.960 --> 0:20:53.680 geographic constraints really make it difficult to offer those quad 0:20:53.720 --> 0:20:55.840 play services on a national basis, which is why it's 0:20:55.840 --> 0:20:58.320 really never taken off thank you so much for joining us. 0:20:58.320 --> 0:21:02.080 Matthew Kanterman, Telecom and video game analyst for Bloomberg Intelligence. 0:21:02.080 --> 0:21:05.840 Also our thanks to Joshua yatsquits Uh Telecom, Cable and 0:21:05.920 --> 0:21:10.359 Media analyst for Bloomberg Intelligence. Uh. I just have to wonder, 0:21:10.440 --> 0:21:12.359 you know, Sprint, it's been on the table for a 0:21:12.400 --> 0:21:14.360 while and it's been looking for some kind of bailout. 0:21:14.440 --> 0:21:17.720 It's interesting that two big cable companies are coming to 0:21:17.800 --> 0:21:32.560 it at the same time. You never know. Well, in 0:21:32.680 --> 0:21:35.560 Europe we actually have had quite a big move in 0:21:36.200 --> 0:21:39.119 government bond yield. You can see two year German yields 0:21:39.200 --> 0:21:42.560 rising to their highest level in about a year, albeit 0:21:42.680 --> 0:21:45.840 still negative half percentage points, so not not terribly high. 0:21:45.920 --> 0:21:48.760 Let's just say I still haven't gotten it's all relative. 0:21:48.760 --> 0:21:50.320 But I want to bring in Simon Ballard who has 0:21:50.320 --> 0:21:52.000 a better sense on all of this and can give 0:21:52.080 --> 0:21:55.199 us some perspective on why we're seeing this move and 0:21:55.280 --> 0:21:59.600 why we're hearing about ECB tapering. Simon Ballard is a 0:21:59.600 --> 0:22:02.800 global it Strategies for bloom Brock News in London. Simon, 0:22:03.359 --> 0:22:08.200 why did e CBS Mario drags speech today? Well, Mario 0:22:08.280 --> 0:22:12.639 drag speech at the ECB Forum has addressed the tapering issue, 0:22:12.640 --> 0:22:14.680 which has been on many people's lips and in certainly 0:22:14.720 --> 0:22:17.359 in their minds for for many months now. The the 0:22:17.400 --> 0:22:20.720 asset purchased program, the quantity of easing program that the 0:22:20.720 --> 0:22:22.920 ECB has gone through over the last couple of years, 0:22:23.359 --> 0:22:25.520 comes to a tentative end or schedule end at the 0:22:25.600 --> 0:22:28.080 end of this year UM. And so the question now 0:22:28.520 --> 0:22:32.280 really is how will the market react when the support 0:22:32.359 --> 0:22:35.919 mechanism is tapered, is taken away, be it through asset 0:22:35.960 --> 0:22:39.560 purchases being reduced. And you've seen that this morning. We've 0:22:39.560 --> 0:22:42.840 had Missie of Dragg suggesting that all being well, the 0:22:42.840 --> 0:22:46.040 the nascent recovery in Europe will allow them to taper 0:22:46.119 --> 0:22:49.320 or at least to sort of scale back accommodation between 0:22:49.359 --> 0:22:50.680 now and the end of the year or certainly the 0:22:50.720 --> 0:22:52.760 early part of two thousand eighteen. And that's why we've 0:22:52.760 --> 0:22:55.359 seen this, this this rising government yours. As you say, 0:22:55.400 --> 0:22:57.600 we're still deeply negative. We've still got major issues over 0:22:57.600 --> 0:23:00.520