Speaker 1: Good morning. It's Tuesday, the twenty second of August in London.
Speaker 1: This is the Bloomberg Daybreak Europe podcast. I'm Stephen Carroll
Speaker 1: coming up today. In a rare move, the UK's competition
Speaker 1: regulator says it's reconsidering Microsoft's sixty nine billion dollar acquisition
Speaker 1: of Activision. The UK based chip designer ARM files for
Speaker 1: the biggest stock market listing of the year in the
Speaker 1: United States, and reports emerged that Elon Musk told Pentagon
Speaker 1: officials he spoke to Vladimir Putin. Let's start with a
Speaker 1: roundup of our top stories. Microsoft has submitted a new
Speaker 1: deal to the UK's competition regulator over its acquisition of Activision.
Speaker 1: In a statement, the company said the restructured deal is
Speaker 1: substantially different to the one that was rejected last year.
Speaker 1: The software giant is eyeing Activision's large catalog of hit
Speaker 1: titles as it seeks to expand into mobile gaming. The
Speaker 1: sixty nine billion dollar offer announced last year would make
Speaker 1: this the largest tech acquisition ever. The UK's biggest tech company,
Speaker 1: ARM has filed to list its shares on the NASDAK
Speaker 1: and What's that to become the biggest US stock market
Speaker 1: launch of the year. Its owner soft Bank is expected
Speaker 1: to seek evaluation of sixty to seventy billion dollars for
Speaker 1: the chip. Designer. Phil Hazlett, the co founder of equity
Speaker 1: z and a marketplace for pre IPO equity, says investors
Speaker 1: will be watching closely.
Speaker 2: It serves as a bit of a bell weather for
Speaker 2: how much do people really think AI is worth and
Speaker 2: how valuable is it to the people selling the picks
Speaker 2: and shovels and videos certainly indicated that it's worth a lot,
Speaker 2: but ARM will be yet another bellwether and kind of
Speaker 2: indicate if there are other companies that are building on
Speaker 2: top of this new AI foundation, they can perform well
Speaker 2: in this market as well, because we honestly haven't seen
Speaker 2: a large tech IPO in the last say two plus years,
Speaker 2: and you know, we had kind of the spac pocalypse
Speaker 2: that happened in twos twenty one, twenty two, and so
Speaker 2: that's not really available anymore. Growth fundings are down, So
Speaker 2: I know that there's a lot of investors and a
Speaker 2: lot of founders and CEOs that are eager to see
Speaker 2: if this is a new channel for fundraising.
Speaker 1: As Phil Hazlett into there, the initial offering is poised
Speaker 1: to be the largest in the US since the electric
Speaker 1: vehicle maker Rivian in twenty twenty one. The NASDAK listing
Speaker 1: as a blow for British politicians who had lobbied the
Speaker 1: homegrown tech firm to sell its shares on the London
Speaker 1: Stock Exchange. SMP has followed Moodies in downgrading the and
Speaker 1: cutting the outlook for a slew of US banks. The
Speaker 1: ratings agency lowered grades one not for six lenders, including
Speaker 1: Key Corp America and umb The SMP says declining deposits
Speaker 1: have squeezed liquidity, while customers moving their funds into higher
Speaker 1: interest accounts has pushed up costs for banks. Ten year
Speaker 1: treasury yields touched the highest level since two thousand and
Speaker 1: seven yesterday as markets reprice for rates remaining higher for longer.
Speaker 1: Nominal and real yields have risen sharply in recent months
Speaker 1: in assign that traders are bracing for tight monetary policy.
Speaker 1: Former Federal Reserve economists Claudia sam says markets are finally
Speaker 1: getting the message.
Speaker 3: I don't think the Fed looks at this as some
Speaker 3: structural shift again, and I don't think the market should
Speaker 3: either necessarily like we might be moving. We might be
Speaker 3: in and continue to be in a higher interest rate environment.
Speaker 3: I think it's actually hard to make that case right now,
Speaker 3: you know. So it's like you want to look out,
Speaker 3: you know, years, Like I think it'll take years for
Speaker 3: us to get back down to you know, the interest
Speaker 3: rates really coming down. The Fed funds are coming down.
Speaker 1: The SAM Consulting fighter added, it's an unknown how long
Speaker 1: it will take to bring inflation down. The longer term.
Speaker 1: Market is shifting on that point as fears of a
Speaker 1: US recession, EBB and death supply surges. Charles Schwab will
Speaker 1: cut jobs and close or downsize offices to save at
Speaker 1: least five hundred million dollars in annual costs as investor
Speaker 1: pressure mounts more from Bloomberg's Charlie Pallace.
Speaker 4: Word came in a regulatory filing. It is the latest
Speaker 4: step by the brokerage to respond to investor pressure. The
Speaker 4: company said it will close or downside there is some
Speaker 4: real estate and reduce headcount. Schwab said earlier this month
Speaker 4: that it was experiencing temporarily lower netflows of client money
Speaker 4: as the brokerage sees attrition of some retail and advisory clients.
Speaker 4: Assets while it integrates td ameerror trade into its business
Speaker 4: in New York, Charlie Pellett Bloomberg Daybreak Europe.
Speaker 1: China is ramping up efforts to support the U one
Speaker 1: and stop a seller from spiraling. The PBOC fixed the
Speaker 1: value of the currency far stronger than the market expected
Speaker 1: as the economy struggles. HSBC head of APAC Equity Strategy
Speaker 1: Herald vander Linde says no stimulus Bizuka is coming.
Speaker 5: China has is a difficult position in the sense because
Speaker 5: on the one hand, a large part of the economy,
Speaker 5: which is infrastructure and property, is about to say thirty
Speaker 5: five forty percent of your economy. They don't really want
Speaker 5: to go and stimulate that. That's been done in the past.
Speaker 5: That's why the bad debtors ended up. They don't want
Speaker 5: to do that. They probably have to do more, but
Speaker 5: they don't want to maybe use all the stimulus in
Speaker 5: one go at the very beginning of this process, and
Speaker 5: that needs to be debridge scheduling taking place. So my
Speaker 5: suspicion is they're going to do this very very carefully.
Speaker 1: Harold Vanderlinder added he sees market sentiment as extremely poor.
Speaker 1: Foreign investors are pessimistic after a prolonged appreciation driven by
Speaker 1: low yields and increasingly shake and increasingly shaky economy. The
Speaker 1: CEOs of Britain's biggest companies saw on above inflation pay
Speaker 1: rise last year, but still earned less than before the pandemic.
Speaker 1: Bloomberg's Ew and Parts reports the bosses of.
Speaker 6: The UK's biggest companies saw their pay jump by sixteen
Speaker 6: percent last year. According to research by the High Pay Center.
Speaker 6: Medium pay for foot two one hundred CEOs increased to
Speaker 6: just over three point nine million pounds. That's still seventy
Speaker 6: thousand pounds short, though of pay packages seen in twenty seventeen.
Speaker 6: The analysis comes amid soaring inflation that's prompted workers in
Speaker 6: a number of industries to go on strike. The latest
Speaker 6: figures also come as some say the UK is becoming
Speaker 6: a less attractive place to do business. The reports also
Speaker 6: found the gap between bosses and workers has widened, with
Speaker 6: the average top CEO now paid one hundred and eighteen
Speaker 6: times more than the typical full time employee in London.
Speaker 6: I'm unepot's been big daybreak Europe.
Speaker 1: And it's been reported that Elon Musk told Pentagon officials
Speaker 1: he had personally spoken with Vladimir Putin in October. According
Speaker 1: to The New Yorker, Musk volunteered the information while briefing
Speaker 1: military personnel about the role of his Starlink Internet service
Speaker 1: in Ukraine. Officials were of the view that the SpaceX
Speaker 1: CEO was becoming nervous about his role in the war
Speaker 1: and wanted to placate Russian concerns by speaking with the president.
Speaker 1: In the same month, the billionaire denied communicating with Putin,
Speaker 1: tweeting that they had not spoken for eighteen months. Those
Speaker 1: are your top stories on the program. On the markets,
Speaker 1: the stocks six hundred is up by half of one percent,
Speaker 1: the Footy one hundred is two tenths higher, and on
Speaker 1: Wall Street, SMPME and E's are a tenth of one
Speaker 1: percent higher. Well, let's get more details now on that
Speaker 1: story about Microsoft submitting a new deal to the UK's
Speaker 1: competition regulator for its active acquisition of Activision.
Speaker 4: The restructured deal.
Speaker 1: The regulator says it's substantially different to the one that
Speaker 1: was rejected last year. The software giant is eyeing Activision's
Speaker 1: large catalog of hit titles as it seeks to expand
Speaker 1: into mobile gaming. The sixty nine billion dollar offer announced
Speaker 1: last year, would make this the largest tech acquisition ever.
Speaker 1: Were joined now to discuss by Sarah Cardell, the chief
Speaker 1: executive of the Competition and Markets Authority. Sarah, good morning
Speaker 1: to you. Thank you very much for being with us
Speaker 1: on Bloomberg Radio. What's different about this new offer from Microsoft?
Speaker 7: Yeah, so there are actually two developments that we're announcing today.
Speaker 7: The first, importantly is that we have finalized the legal
Speaker 7: order that confirms our p vision decision in relation to
Speaker 7: the original Microsoft deal. And then, as you say, separately,
Speaker 7: Microsoft have announced today a new structured deal which is
Speaker 7: substantially different from the deal that was previously on the table,
Speaker 7: and the key difference is that this time Microsoft will
Speaker 7: not be acquiring any of the cloud streaming rights in
Speaker 7: relation to Activisions games for the next fifteen years. Now,
Speaker 7: you might remember that the main reason why we've blot
Speaker 7: the deal originally was because we were concerned about the
Speaker 7: impact on competition in this important new market for cloud gaming.
Speaker 7: Instead of Microsoft acquiring those rights and relations with cloud streaming,
Speaker 7: those rights will separately be sold by Activision to an
Speaker 7: independent gaming company, Ubisoft. So that creates quite a different
Speaker 7: transaction for us to review, and today we're announcing the
Speaker 7: start of a new investigation where we will consider the
Speaker 7: impacts of that deal on competition.
Speaker 1: What will this deal need to prove to you for
Speaker 1: you to be able to approve us.
Speaker 7: So we have been clear all along that it is
Speaker 7: absolutely critical to keep this new developing market for cloud
Speaker 7: gaming open to effective competition, to support innovation, to support choice.
Speaker 7: We had a real concern previously that Microsoft would be
Speaker 7: to control the way that that market was going to develop.
Speaker 7: What we see with this new deal and we will
Speaker 7: have to test it carefully through our review, But what
Speaker 7: we see from the announcement today is that rather than
Speaker 7: Microsoft being able to control how those cloud streaming rights
Speaker 7: are used, that control will shift to an independent company
Speaker 7: and Ubisoft will be able, for example, to enter into
Speaker 7: all sorts of licensing deals with other cloud streaming providers,
Speaker 7: supporting importantly different kinds of business models, for example multi
Speaker 7: grain subscription services or enabling cloud service providers to offer
Speaker 7: their contents over a non Windows operating system. So we
Speaker 7: will be testing carefully whether it does deliver on keeping
Speaker 7: that market open to competition, supporting innovations and choice.
Speaker 1: The CMA and its initial assessment of the previous offer
Speaker 1: from Microsoft had different from regulators in the European Union
Speaker 1: and the outcome of the decision in the United States
Speaker 1: as well on this deal has the CMA ban to
Speaker 1: international pressure to get this deal approves. The regulator faced
Speaker 1: quite significant criticism from the parties over its rejection of
Speaker 1: the original offer.
Speaker 7: So the same stands by our original decision, and as
Speaker 7: I say, we have actually confirmed the legal effects of
Speaker 7: that original prohibition decision today. We have been very clear
Speaker 7: to Microsoft when it raised the possibility of restructuring the
Speaker 7: deal that any restructure would need to fully and comprehensively
Speaker 7: address our concerns. It would need to go through a
Speaker 7: new review, a new investigation. That's what we are launching today,
Speaker 7: and we will assess the impact of that new deal
Speaker 7: on competition, making sure that we protect UK gamers and
Speaker 7: keep that market open to competition.
Speaker 1: How long should that investigation take, so the first.
Speaker 7: Phase of that investigation would be due to be completed
Speaker 7: by the eighteenth of October. We obviously have a lot
Speaker 7: of information that we already have through our for our investigation,
Speaker 7: so we'll be moving forward with this as quickly and
Speaker 7: as efficiently as we can. But making sure that we
Speaker 7: have a full opportunity to test this deal and hear
Speaker 7: from sub parties.
Speaker 1: Now Microsoft's president, but Brad Smith, had described it as
Speaker 1: being bad for Britain on your original blocking of the deal.
Speaker 1: What sort of dialogue have you had with the company
Speaker 1: since then that has led them to submit this restructured offer.
Speaker 7: The Microsoft indicated that they were interested in exploring a
Speaker 7: restructured deal to address our concerns, and I would say
Speaker 7: we have been very clear with them that in order
Speaker 7: to do that, they would need to come up with
Speaker 7: something that was substantially different and fully and comprehensively addressed
Speaker 7: our competition concerned. The announcement from Sadsmith today indicates he
Speaker 7: believes they have done that, and obviously it will be
Speaker 7: for us to review. That's really the investigation that we're
Speaker 7: starting today.
Speaker 1: Has the CMA been damaged by this?
Speaker 7: I think the CMA is in an incredibly positive position actually,
Speaker 7: because we have been clear that we are protecting competition
Speaker 7: in the UK. That has forced Microsoft to rethink the
Speaker 7: deal structure and come up with a deal that they
Speaker 7: believe addresses are concerned So I think it puts the
Speaker 7: CMA under the UK in a very good position.
Speaker 1: What's the different for UK consumers with this restructured offer?
Speaker 7: Do we all need to test this very carefully obviously
Speaker 7: for our investigation, but it appears that this creates the
Speaker 7: possibility to really open up this market, and certainly, looking
Speaker 7: at the statement from Ubisoft today, they have been clear
Speaker 7: that this creates new opportunities to bring cloud gaming to
Speaker 7: a much wider range of users than players.
Speaker 1: Will the rights for the games in question being different
Speaker 1: in the EEA and the rest of the world. Is
Speaker 1: that something that consumers of these products are likely to
Speaker 1: see a difference.
Speaker 7: Over So I don't think we'll have any impact on
Speaker 7: the user experience. Microsoft have been clear that they want
Speaker 7: to continue to honor the commitments that they have given
Speaker 7: to the European Commission that the user experience should be unaffected.
Speaker 1: What's the message that politicians should take away from this
Speaker 1: as well? Your organization has taken on a much greater
Speaker 1: regulatory role since Bregxist, because so much of the competition
Speaker 1: policy was being set and determined out of Brussels previously.
Speaker 1: Does the CMA need more resources to be able to
Speaker 1: make big decisions like this in the future.
Speaker 7: CMA is very well resourced to take on these kinds
Speaker 7: of decisions, and the message really to everybody is that
Speaker 7: the CMA will review every transaction that we consider carefully,
Speaker 7: thoroughly objectively, and we will make sure that we protect
Speaker 7: competition in the market or the UK consumers.
Speaker 1: Is the UK a good place for tech companies to
Speaker 1: be doing business? From a regulatory point of view?
Speaker 7: I think the UK is a very good place for
Speaker 7: tech companies to be doing goodness.
Speaker 1: Yes, Okay, Sarah Cardinal, Chief Executive of the Competition and
Speaker 1: Markets Authority, thank you very much for joining us on
Speaker 1: Bloomberg Radio this morning, as we've had that breaking news
Speaker 1: that Microsoft has submitted a new deal to be reviewed
Speaker 1: by the CMA for its act position of the gamesmaker Activision.
Speaker 1: This is Bloomberg Daybreak Europe, your morning where from the
Speaker 1: stories making news from London to Wall Street and beyond.
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