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Speaker 1: Good morning. It's Tuesday, the twenty second of August in London.

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Speaker 1: This is the Bloomberg Daybreak Europe podcast. I'm Stephen Carroll

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Speaker 1: coming up today. In a rare move, the UK's competition

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Speaker 1: regulator says it's reconsidering Microsoft's sixty nine billion dollar acquisition

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Speaker 1: of Activision. The UK based chip designer ARM files for

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Speaker 1: the biggest stock market listing of the year in the

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Speaker 1: United States, and reports emerged that Elon Musk told Pentagon

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Speaker 1: officials he spoke to Vladimir Putin. Let's start with a

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Speaker 1: roundup of our top stories. Microsoft has submitted a new

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Speaker 1: deal to the UK's competition regulator over its acquisition of Activision.

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Speaker 1: In a statement, the company said the restructured deal is

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Speaker 1: substantially different to the one that was rejected last year.

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Speaker 1: The software giant is eyeing Activision's large catalog of hit

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Speaker 1: titles as it seeks to expand into mobile gaming. The

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Speaker 1: sixty nine billion dollar offer announced last year would make

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Speaker 1: this the largest tech acquisition ever. The UK's biggest tech company,

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Speaker 1: ARM has filed to list its shares on the NASDAK

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Speaker 1: and What's that to become the biggest US stock market

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Speaker 1: launch of the year. Its owner soft Bank is expected

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Speaker 1: to seek evaluation of sixty to seventy billion dollars for

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Speaker 1: the chip. Designer. Phil Hazlett, the co founder of equity

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Speaker 1: z and a marketplace for pre IPO equity, says investors

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Speaker 1: will be watching closely.

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Speaker 2: It serves as a bit of a bell weather for

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Speaker 2: how much do people really think AI is worth and

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Speaker 2: how valuable is it to the people selling the picks

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Speaker 2: and shovels and videos certainly indicated that it's worth a lot,

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Speaker 2: but ARM will be yet another bellwether and kind of

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Speaker 2: indicate if there are other companies that are building on

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Speaker 2: top of this new AI foundation, they can perform well

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Speaker 2: in this market as well, because we honestly haven't seen

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Speaker 2: a large tech IPO in the last say two plus years,

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Speaker 2: and you know, we had kind of the spac pocalypse

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Speaker 2: that happened in twos twenty one, twenty two, and so

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Speaker 2: that's not really available anymore. Growth fundings are down, So

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Speaker 2: I know that there's a lot of investors and a

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Speaker 2: lot of founders and CEOs that are eager to see

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Speaker 2: if this is a new channel for fundraising.

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Speaker 1: As Phil Hazlett into there, the initial offering is poised

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Speaker 1: to be the largest in the US since the electric

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Speaker 1: vehicle maker Rivian in twenty twenty one. The NASDAK listing

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Speaker 1: as a blow for British politicians who had lobbied the

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Speaker 1: homegrown tech firm to sell its shares on the London

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Speaker 1: Stock Exchange. SMP has followed Moodies in downgrading the and

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Speaker 1: cutting the outlook for a slew of US banks. The

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Speaker 1: ratings agency lowered grades one not for six lenders, including

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Speaker 1: Key Corp America and umb The SMP says declining deposits

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Speaker 1: have squeezed liquidity, while customers moving their funds into higher

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Speaker 1: interest accounts has pushed up costs for banks. Ten year

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Speaker 1: treasury yields touched the highest level since two thousand and

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Speaker 1: seven yesterday as markets reprice for rates remaining higher for longer.

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Speaker 1: Nominal and real yields have risen sharply in recent months

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Speaker 1: in assign that traders are bracing for tight monetary policy.

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Speaker 1: Former Federal Reserve economists Claudia sam says markets are finally

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Speaker 1: getting the message.

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Speaker 3: I don't think the Fed looks at this as some

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Speaker 3: structural shift again, and I don't think the market should

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Speaker 3: either necessarily like we might be moving. We might be

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Speaker 3: in and continue to be in a higher interest rate environment.

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Speaker 3: I think it's actually hard to make that case right now,

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Speaker 3: you know. So it's like you want to look out,

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Speaker 3: you know, years, Like I think it'll take years for

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Speaker 3: us to get back down to you know, the interest

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Speaker 3: rates really coming down. The Fed funds are coming down.

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Speaker 1: The SAM Consulting fighter added, it's an unknown how long

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Speaker 1: it will take to bring inflation down. The longer term.

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Speaker 1: Market is shifting on that point as fears of a

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Speaker 1: US recession, EBB and death supply surges. Charles Schwab will

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Speaker 1: cut jobs and close or downsize offices to save at

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Speaker 1: least five hundred million dollars in annual costs as investor

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Speaker 1: pressure mounts more from Bloomberg's Charlie Pallace.

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Speaker 4: Word came in a regulatory filing. It is the latest

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Speaker 4: step by the brokerage to respond to investor pressure. The

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Speaker 4: company said it will close or downside there is some

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Speaker 4: real estate and reduce headcount. Schwab said earlier this month

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Speaker 4: that it was experiencing temporarily lower netflows of client money

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Speaker 4: as the brokerage sees attrition of some retail and advisory clients.

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Speaker 4: Assets while it integrates td ameerror trade into its business

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Speaker 4: in New York, Charlie Pellett Bloomberg Daybreak Europe.

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Speaker 1: China is ramping up efforts to support the U one

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Speaker 1: and stop a seller from spiraling. The PBOC fixed the

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Speaker 1: value of the currency far stronger than the market expected

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Speaker 1: as the economy struggles. HSBC head of APAC Equity Strategy

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Speaker 1: Herald vander Linde says no stimulus Bizuka is coming.

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Speaker 5: China has is a difficult position in the sense because

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Speaker 5: on the one hand, a large part of the economy,

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Speaker 5: which is infrastructure and property, is about to say thirty

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Speaker 5: five forty percent of your economy. They don't really want

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Speaker 5: to go and stimulate that. That's been done in the past.

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Speaker 5: That's why the bad debtors ended up. They don't want

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Speaker 5: to do that. They probably have to do more, but

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Speaker 5: they don't want to maybe use all the stimulus in

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Speaker 5: one go at the very beginning of this process, and

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Speaker 5: that needs to be debridge scheduling taking place. So my

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Speaker 5: suspicion is they're going to do this very very carefully.

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Speaker 1: Harold Vanderlinder added he sees market sentiment as extremely poor.

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Speaker 1: Foreign investors are pessimistic after a prolonged appreciation driven by

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Speaker 1: low yields and increasingly shake and increasingly shaky economy. The

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Speaker 1: CEOs of Britain's biggest companies saw on above inflation pay

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Speaker 1: rise last year, but still earned less than before the pandemic.

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Speaker 1: Bloomberg's Ew and Parts reports the bosses of.

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Speaker 6: The UK's biggest companies saw their pay jump by sixteen

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Speaker 6: percent last year. According to research by the High Pay Center.

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Speaker 6: Medium pay for foot two one hundred CEOs increased to

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Speaker 6: just over three point nine million pounds. That's still seventy

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Speaker 6: thousand pounds short, though of pay packages seen in twenty seventeen.

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Speaker 6: The analysis comes amid soaring inflation that's prompted workers in

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Speaker 6: a number of industries to go on strike. The latest

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Speaker 6: figures also come as some say the UK is becoming

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Speaker 6: a less attractive place to do business. The reports also

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Speaker 6: found the gap between bosses and workers has widened, with

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Speaker 6: the average top CEO now paid one hundred and eighteen

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Speaker 6: times more than the typical full time employee in London.

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Speaker 6: I'm unepot's been big daybreak Europe.

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Speaker 1: And it's been reported that Elon Musk told Pentagon officials

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Speaker 1: he had personally spoken with Vladimir Putin in October. According

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Speaker 1: to The New Yorker, Musk volunteered the information while briefing

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Speaker 1: military personnel about the role of his Starlink Internet service

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Speaker 1: in Ukraine. Officials were of the view that the SpaceX

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Speaker 1: CEO was becoming nervous about his role in the war

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Speaker 1: and wanted to placate Russian concerns by speaking with the president.

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Speaker 1: In the same month, the billionaire denied communicating with Putin,

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Speaker 1: tweeting that they had not spoken for eighteen months. Those

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Speaker 1: are your top stories on the program. On the markets,

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Speaker 1: the stocks six hundred is up by half of one percent,

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Speaker 1: the Footy one hundred is two tenths higher, and on

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Speaker 1: Wall Street, SMPME and E's are a tenth of one

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Speaker 1: percent higher. Well, let's get more details now on that

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Speaker 1: story about Microsoft submitting a new deal to the UK's

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Speaker 1: competition regulator for its active acquisition of Activision.

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Speaker 4: The restructured deal.

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Speaker 1: The regulator says it's substantially different to the one that

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Speaker 1: was rejected last year. The software giant is eyeing Activision's

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Speaker 1: large catalog of hit titles as it seeks to expand

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Speaker 1: into mobile gaming. The sixty nine billion dollar offer announced

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Speaker 1: last year, would make this the largest tech acquisition ever.

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Speaker 1: Were joined now to discuss by Sarah Cardell, the chief

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Speaker 1: executive of the Competition and Markets Authority. Sarah, good morning

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Speaker 1: to you. Thank you very much for being with us

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Speaker 1: on Bloomberg Radio. What's different about this new offer from Microsoft?

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Speaker 7: Yeah, so there are actually two developments that we're announcing today.

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Speaker 7: The first, importantly is that we have finalized the legal

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Speaker 7: order that confirms our p vision decision in relation to

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Speaker 7: the original Microsoft deal. And then, as you say, separately,

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Speaker 7: Microsoft have announced today a new structured deal which is

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Speaker 7: substantially different from the deal that was previously on the table,

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Speaker 7: and the key difference is that this time Microsoft will

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Speaker 7: not be acquiring any of the cloud streaming rights in

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Speaker 7: relation to Activisions games for the next fifteen years. Now,

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Speaker 7: you might remember that the main reason why we've blot

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Speaker 7: the deal originally was because we were concerned about the

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Speaker 7: impact on competition in this important new market for cloud gaming.

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Speaker 7: Instead of Microsoft acquiring those rights and relations with cloud streaming,

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Speaker 7: those rights will separately be sold by Activision to an

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Speaker 7: independent gaming company, Ubisoft. So that creates quite a different

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Speaker 7: transaction for us to review, and today we're announcing the

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Speaker 7: start of a new investigation where we will consider the

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Speaker 7: impacts of that deal on competition.

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Speaker 1: What will this deal need to prove to you for

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Speaker 1: you to be able to approve us.

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Speaker 7: So we have been clear all along that it is

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Speaker 7: absolutely critical to keep this new developing market for cloud

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Speaker 7: gaming open to effective competition, to support innovation, to support choice.

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Speaker 7: We had a real concern previously that Microsoft would be

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Speaker 7: to control the way that that market was going to develop.

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Speaker 7: What we see with this new deal and we will

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Speaker 7: have to test it carefully through our review, But what

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Speaker 7: we see from the announcement today is that rather than

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Speaker 7: Microsoft being able to control how those cloud streaming rights

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Speaker 7: are used, that control will shift to an independent company

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Speaker 7: and Ubisoft will be able, for example, to enter into

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Speaker 7: all sorts of licensing deals with other cloud streaming providers,

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Speaker 7: supporting importantly different kinds of business models, for example multi

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Speaker 7: grain subscription services or enabling cloud service providers to offer

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Speaker 7: their contents over a non Windows operating system. So we

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Speaker 7: will be testing carefully whether it does deliver on keeping

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Speaker 7: that market open to competition, supporting innovations and choice.

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Speaker 1: The CMA and its initial assessment of the previous offer

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Speaker 1: from Microsoft had different from regulators in the European Union

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Speaker 1: and the outcome of the decision in the United States

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Speaker 1: as well on this deal has the CMA ban to

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Speaker 1: international pressure to get this deal approves. The regulator faced

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Speaker 1: quite significant criticism from the parties over its rejection of

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Speaker 1: the original offer.

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Speaker 7: So the same stands by our original decision, and as

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Speaker 7: I say, we have actually confirmed the legal effects of

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Speaker 7: that original prohibition decision today. We have been very clear

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Speaker 7: to Microsoft when it raised the possibility of restructuring the

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Speaker 7: deal that any restructure would need to fully and comprehensively

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Speaker 7: address our concerns. It would need to go through a

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Speaker 7: new review, a new investigation. That's what we are launching today,

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Speaker 7: and we will assess the impact of that new deal

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Speaker 7: on competition, making sure that we protect UK gamers and

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Speaker 7: keep that market open to competition.

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Speaker 1: How long should that investigation take, so the first.

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Speaker 7: Phase of that investigation would be due to be completed

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Speaker 7: by the eighteenth of October. We obviously have a lot

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Speaker 7: of information that we already have through our for our investigation,

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Speaker 7: so we'll be moving forward with this as quickly and

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Speaker 7: as efficiently as we can. But making sure that we

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Speaker 7: have a full opportunity to test this deal and hear

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Speaker 7: from sub parties.

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Speaker 1: Now Microsoft's president, but Brad Smith, had described it as

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Speaker 1: being bad for Britain on your original blocking of the deal.

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Speaker 1: What sort of dialogue have you had with the company

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Speaker 1: since then that has led them to submit this restructured offer.

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Speaker 7: The Microsoft indicated that they were interested in exploring a

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Speaker 7: restructured deal to address our concerns, and I would say

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Speaker 7: we have been very clear with them that in order

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Speaker 7: to do that, they would need to come up with

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Speaker 7: something that was substantially different and fully and comprehensively addressed

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Speaker 7: our competition concerned. The announcement from Sadsmith today indicates he

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Speaker 7: believes they have done that, and obviously it will be

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Speaker 7: for us to review. That's really the investigation that we're

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Speaker 7: starting today.

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Speaker 1: Has the CMA been damaged by this?

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Speaker 7: I think the CMA is in an incredibly positive position actually,

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Speaker 7: because we have been clear that we are protecting competition

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Speaker 7: in the UK. That has forced Microsoft to rethink the

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Speaker 7: deal structure and come up with a deal that they

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Speaker 7: believe addresses are concerned So I think it puts the

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Speaker 7: CMA under the UK in a very good position.

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Speaker 1: What's the different for UK consumers with this restructured offer?

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Speaker 7: Do we all need to test this very carefully obviously

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Speaker 7: for our investigation, but it appears that this creates the

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Speaker 7: possibility to really open up this market, and certainly, looking

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Speaker 7: at the statement from Ubisoft today, they have been clear

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Speaker 7: that this creates new opportunities to bring cloud gaming to

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Speaker 7: a much wider range of users than players.

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Speaker 1: Will the rights for the games in question being different

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Speaker 1: in the EEA and the rest of the world. Is

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Speaker 1: that something that consumers of these products are likely to

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Speaker 1: see a difference.

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Speaker 7: Over So I don't think we'll have any impact on

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Speaker 7: the user experience. Microsoft have been clear that they want

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Speaker 7: to continue to honor the commitments that they have given

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Speaker 7: to the European Commission that the user experience should be unaffected.

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Speaker 1: What's the message that politicians should take away from this

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Speaker 1: as well? Your organization has taken on a much greater

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Speaker 1: regulatory role since Bregxist, because so much of the competition

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Speaker 1: policy was being set and determined out of Brussels previously.

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Speaker 1: Does the CMA need more resources to be able to

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Speaker 1: make big decisions like this in the future.

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Speaker 7: CMA is very well resourced to take on these kinds

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Speaker 7: of decisions, and the message really to everybody is that

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Speaker 7: the CMA will review every transaction that we consider carefully,

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Speaker 7: thoroughly objectively, and we will make sure that we protect

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Speaker 7: competition in the market or the UK consumers.

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Speaker 1: Is the UK a good place for tech companies to

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Speaker 1: be doing business? From a regulatory point of view?

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Speaker 7: I think the UK is a very good place for

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Speaker 7: tech companies to be doing goodness.

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Speaker 1: Yes, Okay, Sarah Cardinal, Chief Executive of the Competition and

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Speaker 1: Markets Authority, thank you very much for joining us on

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Speaker 1: Bloomberg Radio this morning, as we've had that breaking news

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Speaker 1: that Microsoft has submitted a new deal to be reviewed

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Speaker 1: by the CMA for its act position of the gamesmaker Activision.

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Speaker 1: This is Bloomberg Daybreak Europe, your morning where from the

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