WEBVTT - CMA Chief Talks New Microsoft-Activision Deal

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

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<v Speaker 1>This is the Bloomberg Daybreak Europe podcast. I'm Stephen Carroll

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

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<v Speaker 1>regulator says it's reconsidering Microsoft's sixty nine billion dollar acquisition

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<v Speaker 1>of Activision. The UK based chip designer ARM files for

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<v Speaker 1>the biggest stock market listing of the year in the

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<v Speaker 1>United States, and reports emerged that Elon Musk told Pentagon

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<v Speaker 1>officials he spoke to Vladimir Putin. Let's start with a

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<v Speaker 1>roundup of our top stories. Microsoft has submitted a new

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

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<v Speaker 1>In a statement, the company said the restructured deal is

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<v Speaker 1>substantially different to the one that was rejected last year.

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<v Speaker 1>The software giant is eyeing Activision's large catalog of hit

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<v Speaker 1>titles as it seeks to expand into mobile gaming. The

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<v Speaker 1>sixty nine billion dollar offer announced last year would make

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

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<v Speaker 1>ARM has filed to list its shares on the NASDAK

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<v Speaker 1>and What's that to become the biggest US stock market

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<v Speaker 1>launch of the year. Its owner soft Bank is expected

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<v Speaker 1>to seek evaluation of sixty to seventy billion dollars for

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<v Speaker 1>the chip. Designer. Phil Hazlett, the co founder of equity

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<v Speaker 1>z and a marketplace for pre IPO equity, says investors

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<v Speaker 1>will be watching closely.

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<v Speaker 2>It serves as a bit of a bell weather for

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<v Speaker 2>how much do people really think AI is worth and

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<v Speaker 2>how valuable is it to the people selling the picks

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<v Speaker 2>and shovels and videos certainly indicated that it's worth a lot,

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<v Speaker 2>but ARM will be yet another bellwether and kind of

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<v Speaker 2>indicate if there are other companies that are building on

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<v Speaker 2>top of this new AI foundation, they can perform well

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<v Speaker 2>in this market as well, because we honestly haven't seen

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<v Speaker 2>a large tech IPO in the last say two plus years,

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<v Speaker 2>and you know, we had kind of the spac pocalypse

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<v Speaker 2>that happened in twos twenty one, twenty two, and so

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

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<v Speaker 2>I know that there's a lot of investors and a

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<v Speaker 2>lot of founders and CEOs that are eager to see

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<v Speaker 2>if this is a new channel for fundraising.

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<v Speaker 1>As Phil Hazlett into there, the initial offering is poised

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<v Speaker 1>to be the largest in the US since the electric

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<v Speaker 1>vehicle maker Rivian in twenty twenty one. The NASDAK listing

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<v Speaker 1>as a blow for British politicians who had lobbied the

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<v Speaker 1>homegrown tech firm to sell its shares on the London

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<v Speaker 1>Stock Exchange. SMP has followed Moodies in downgrading the and

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<v Speaker 1>cutting the outlook for a slew of US banks. The

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<v Speaker 1>ratings agency lowered grades one not for six lenders, including

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<v Speaker 1>Key Corp America and umb The SMP says declining deposits

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<v Speaker 1>have squeezed liquidity, while customers moving their funds into higher

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<v Speaker 1>interest accounts has pushed up costs for banks. Ten year

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<v Speaker 1>treasury yields touched the highest level since two thousand and

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<v Speaker 1>seven yesterday as markets reprice for rates remaining higher for longer.

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<v Speaker 1>Nominal and real yields have risen sharply in recent months

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<v Speaker 1>in assign that traders are bracing for tight monetary policy.

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<v Speaker 1>Former Federal Reserve economists Claudia sam says markets are finally

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<v Speaker 1>getting the message.

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<v Speaker 3>I don't think the Fed looks at this as some

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<v Speaker 3>structural shift again, and I don't think the market should

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<v Speaker 3>either necessarily like we might be moving. We might be

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<v Speaker 3>in and continue to be in a higher interest rate environment.

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

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<v Speaker 3>you know. So it's like you want to look out,

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<v Speaker 3>you know, years, Like I think it'll take years for

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<v Speaker 3>us to get back down to you know, the interest

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<v Speaker 3>rates really coming down. The Fed funds are coming down.

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<v Speaker 1>The SAM Consulting fighter added, it's an unknown how long

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<v Speaker 1>it will take to bring inflation down. The longer term.

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<v Speaker 1>Market is shifting on that point as fears of a

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<v Speaker 1>US recession, EBB and death supply surges. Charles Schwab will

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<v Speaker 1>cut jobs and close or downsize offices to save at

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<v Speaker 1>least five hundred million dollars in annual costs as investor

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<v Speaker 1>pressure mounts more from Bloomberg's Charlie Pallace.

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<v Speaker 4>Word came in a regulatory filing. It is the latest

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<v Speaker 4>step by the brokerage to respond to investor pressure. The

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<v Speaker 4>company said it will close or downside there is some

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<v Speaker 4>real estate and reduce headcount. Schwab said earlier this month

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<v Speaker 4>that it was experiencing temporarily lower netflows of client money

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<v Speaker 4>as the brokerage sees attrition of some retail and advisory clients.

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<v Speaker 4>Assets while it integrates td ameerror trade into its business

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<v Speaker 4>in New York, Charlie Pellett Bloomberg Daybreak Europe.

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<v Speaker 1>China is ramping up efforts to support the U one

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<v Speaker 1>and stop a seller from spiraling. The PBOC fixed the

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<v Speaker 1>value of the currency far stronger than the market expected

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<v Speaker 1>as the economy struggles. HSBC head of APAC Equity Strategy

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<v Speaker 1>Herald vander Linde says no stimulus Bizuka is coming.

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<v Speaker 5>China has is a difficult position in the sense because

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<v Speaker 5>on the one hand, a large part of the economy,

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<v Speaker 5>which is infrastructure and property, is about to say thirty

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<v Speaker 5>five forty percent of your economy. They don't really want

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

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

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<v Speaker 5>to do that. They probably have to do more, but

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<v Speaker 5>they don't want to maybe use all the stimulus in

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<v Speaker 5>one go at the very beginning of this process, and

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<v Speaker 5>that needs to be debridge scheduling taking place. So my

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<v Speaker 5>suspicion is they're going to do this very very carefully.

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<v Speaker 1>Harold Vanderlinder added he sees market sentiment as extremely poor.

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<v Speaker 1>Foreign investors are pessimistic after a prolonged appreciation driven by

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<v Speaker 1>low yields and increasingly shake and increasingly shaky economy. The

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<v Speaker 1>CEOs of Britain's biggest companies saw on above inflation pay

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<v Speaker 1>rise last year, but still earned less than before the pandemic.

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<v Speaker 1>Bloomberg's Ew and Parts reports the bosses of.

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<v Speaker 6>The UK's biggest companies saw their pay jump by sixteen

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<v Speaker 6>percent last year. According to research by the High Pay Center.

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<v Speaker 6>Medium pay for foot two one hundred CEOs increased to

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<v Speaker 6>just over three point nine million pounds. That's still seventy

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<v Speaker 6>thousand pounds short, though of pay packages seen in twenty seventeen.

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<v Speaker 6>The analysis comes amid soaring inflation that's prompted workers in

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<v Speaker 6>a number of industries to go on strike. The latest

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<v Speaker 6>figures also come as some say the UK is becoming

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<v Speaker 6>a less attractive place to do business. The reports also

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<v Speaker 6>found the gap between bosses and workers has widened, with

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<v Speaker 6>the average top CEO now paid one hundred and eighteen

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<v Speaker 6>times more than the typical full time employee in London.

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<v Speaker 6>I'm unepot's been big daybreak Europe.

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<v Speaker 1>And it's been reported that Elon Musk told Pentagon officials

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<v Speaker 1>he had personally spoken with Vladimir Putin in October. According

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<v Speaker 1>to The New Yorker, Musk volunteered the information while briefing

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<v Speaker 1>military personnel about the role of his Starlink Internet service

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<v Speaker 1>in Ukraine. Officials were of the view that the SpaceX

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<v Speaker 1>CEO was becoming nervous about his role in the war

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<v Speaker 1>and wanted to placate Russian concerns by speaking with the president.

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<v Speaker 1>In the same month, the billionaire denied communicating with Putin,

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<v Speaker 1>tweeting that they had not spoken for eighteen months. Those

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<v Speaker 1>are your top stories on the program. On the markets,

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<v Speaker 1>the stocks six hundred is up by half of one percent,

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<v Speaker 1>the Footy one hundred is two tenths higher, and on

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<v Speaker 1>Wall Street, SMPME and E's are a tenth of one

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

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<v Speaker 1>story about Microsoft submitting a new deal to the UK's

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<v Speaker 1>competition regulator for its active acquisition of Activision.

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<v Speaker 4>The restructured deal.

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<v Speaker 1>The regulator says it's substantially different to the one that

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<v Speaker 1>was rejected last year. The software giant is eyeing Activision's

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<v Speaker 1>large catalog of hit titles as it seeks to expand

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<v Speaker 1>into mobile gaming. The sixty nine billion dollar offer announced

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<v Speaker 1>last year, would make this the largest tech acquisition ever.

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<v Speaker 1>Were joined now to discuss by Sarah Cardell, the chief

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<v Speaker 1>executive of the Competition and Markets Authority. Sarah, good morning

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<v Speaker 1>to you. Thank you very much for being with us

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

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

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<v Speaker 7>The first, importantly is that we have finalized the legal

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<v Speaker 7>order that confirms our p vision decision in relation to

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<v Speaker 7>the original Microsoft deal. And then, as you say, separately,

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<v Speaker 7>Microsoft have announced today a new structured deal which is

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<v Speaker 7>substantially different from the deal that was previously on the table,

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<v Speaker 7>and the key difference is that this time Microsoft will

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<v Speaker 7>not be acquiring any of the cloud streaming rights in

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<v Speaker 7>relation to Activisions games for the next fifteen years. Now,

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<v Speaker 7>you might remember that the main reason why we've blot

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<v Speaker 7>the deal originally was because we were concerned about the

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<v Speaker 7>impact on competition in this important new market for cloud gaming.

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<v Speaker 7>Instead of Microsoft acquiring those rights and relations with cloud streaming,

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<v Speaker 7>those rights will separately be sold by Activision to an

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<v Speaker 7>independent gaming company, Ubisoft. So that creates quite a different

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<v Speaker 7>transaction for us to review, and today we're announcing the

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<v Speaker 7>start of a new investigation where we will consider the

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<v Speaker 7>impacts of that deal on competition.

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<v Speaker 1>What will this deal need to prove to you for

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<v Speaker 1>you to be able to approve us.

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<v Speaker 7>So we have been clear all along that it is

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<v Speaker 7>absolutely critical to keep this new developing market for cloud

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<v Speaker 7>gaming open to effective competition, to support innovation, to support choice.

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<v Speaker 7>We had a real concern previously that Microsoft would be

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<v Speaker 7>to control the way that that market was going to develop.

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<v Speaker 7>What we see with this new deal and we will

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<v Speaker 7>have to test it carefully through our review, But what

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<v Speaker 7>we see from the announcement today is that rather than

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<v Speaker 7>Microsoft being able to control how those cloud streaming rights

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<v Speaker 7>are used, that control will shift to an independent company

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<v Speaker 7>and Ubisoft will be able, for example, to enter into

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<v Speaker 7>all sorts of licensing deals with other cloud streaming providers,

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<v Speaker 7>supporting importantly different kinds of business models, for example multi

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<v Speaker 7>grain subscription services or enabling cloud service providers to offer

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<v Speaker 7>their contents over a non Windows operating system. So we

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<v Speaker 7>will be testing carefully whether it does deliver on keeping

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<v Speaker 7>that market open to competition, supporting innovations and choice.

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<v Speaker 1>The CMA and its initial assessment of the previous offer

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<v Speaker 1>from Microsoft had different from regulators in the European Union

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<v Speaker 1>and the outcome of the decision in the United States

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<v Speaker 1>as well on this deal has the CMA ban to

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<v Speaker 1>international pressure to get this deal approves. The regulator faced

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<v Speaker 1>quite significant criticism from the parties over its rejection of

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<v Speaker 1>the original offer.

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<v Speaker 7>So the same stands by our original decision, and as

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<v Speaker 7>I say, we have actually confirmed the legal effects of

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<v Speaker 7>that original prohibition decision today. We have been very clear

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<v Speaker 7>to Microsoft when it raised the possibility of restructuring the

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<v Speaker 7>deal that any restructure would need to fully and comprehensively

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<v Speaker 7>address our concerns. It would need to go through a

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

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<v Speaker 7>and we will assess the impact of that new deal

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<v Speaker 7>on competition, making sure that we protect UK gamers and

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<v Speaker 7>keep that market open to competition.

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<v Speaker 1>How long should that investigation take, so the first.

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<v Speaker 7>Phase of that investigation would be due to be completed

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<v Speaker 7>by the eighteenth of October. We obviously have a lot

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<v Speaker 7>of information that we already have through our for our investigation,

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<v Speaker 7>so we'll be moving forward with this as quickly and

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<v Speaker 7>as efficiently as we can. But making sure that we

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<v Speaker 7>have a full opportunity to test this deal and hear

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<v Speaker 7>from sub parties.

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<v Speaker 1>Now Microsoft's president, but Brad Smith, had described it as

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<v Speaker 1>being bad for Britain on your original blocking of the deal.

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<v Speaker 1>What sort of dialogue have you had with the company

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<v Speaker 1>since then that has led them to submit this restructured offer.

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<v Speaker 7>The Microsoft indicated that they were interested in exploring a

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<v Speaker 7>restructured deal to address our concerns, and I would say

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<v Speaker 7>we have been very clear with them that in order

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<v Speaker 7>to do that, they would need to come up with

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<v Speaker 7>something that was substantially different and fully and comprehensively addressed

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<v Speaker 7>our competition concerned. The announcement from Sadsmith today indicates he

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<v Speaker 7>believes they have done that, and obviously it will be

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

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<v Speaker 7>starting today.

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<v Speaker 1>Has the CMA been damaged by this?

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<v Speaker 7>I think the CMA is in an incredibly positive position actually,

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<v Speaker 7>because we have been clear that we are protecting competition

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<v Speaker 7>in the UK. That has forced Microsoft to rethink the

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<v Speaker 7>deal structure and come up with a deal that they

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<v Speaker 7>believe addresses are concerned So I think it puts the

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<v Speaker 7>CMA under the UK in a very good position.

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<v Speaker 1>What's the different for UK consumers with this restructured offer?

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<v Speaker 7>Do we all need to test this very carefully obviously

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<v Speaker 7>for our investigation, but it appears that this creates the

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<v Speaker 7>possibility to really open up this market, and certainly, looking

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<v Speaker 7>at the statement from Ubisoft today, they have been clear

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<v Speaker 7>that this creates new opportunities to bring cloud gaming to

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<v Speaker 7>a much wider range of users than players.

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<v Speaker 1>Will the rights for the games in question being different

0:12:35.760 --> 0:12:38.440
<v Speaker 1>in the EEA and the rest of the world. Is

0:12:38.480 --> 0:12:41.760
<v Speaker 1>that something that consumers of these products are likely to

0:12:41.800 --> 0:12:42.920
<v Speaker 1>see a difference.

0:12:42.559 --> 0:12:46.280
<v Speaker 7>Over So I don't think we'll have any impact on

0:12:46.520 --> 0:12:50.280
<v Speaker 7>the user experience. Microsoft have been clear that they want

0:12:50.400 --> 0:12:53.040
<v Speaker 7>to continue to honor the commitments that they have given

0:12:53.080 --> 0:12:56.679
<v Speaker 7>to the European Commission that the user experience should be unaffected.

0:12:58.480 --> 0:13:02.000
<v Speaker 1>What's the message that politicians should take away from this

0:13:02.320 --> 0:13:05.800
<v Speaker 1>as well? Your organization has taken on a much greater

0:13:05.920 --> 0:13:09.239
<v Speaker 1>regulatory role since Bregxist, because so much of the competition

0:13:09.400 --> 0:13:14.400
<v Speaker 1>policy was being set and determined out of Brussels previously.

0:13:14.880 --> 0:13:17.640
<v Speaker 1>Does the CMA need more resources to be able to

0:13:17.679 --> 0:13:19.720
<v Speaker 1>make big decisions like this in the future.

0:13:21.120 --> 0:13:23.640
<v Speaker 7>CMA is very well resourced to take on these kinds

0:13:23.640 --> 0:13:26.720
<v Speaker 7>of decisions, and the message really to everybody is that

0:13:26.760 --> 0:13:30.160
<v Speaker 7>the CMA will review every transaction that we consider carefully,

0:13:30.400 --> 0:13:33.440
<v Speaker 7>thoroughly objectively, and we will make sure that we protect

0:13:33.480 --> 0:13:36.800
<v Speaker 7>competition in the market or the UK consumers.

0:13:37.559 --> 0:13:39.920
<v Speaker 1>Is the UK a good place for tech companies to

0:13:39.920 --> 0:13:42.160
<v Speaker 1>be doing business? From a regulatory point of view?

0:13:42.960 --> 0:13:44.520
<v Speaker 7>I think the UK is a very good place for

0:13:44.760 --> 0:13:45.960
<v Speaker 7>tech companies to be doing goodness.

0:13:46.000 --> 0:13:49.079
<v Speaker 1>Yes, Okay, Sarah Cardinal, Chief Executive of the Competition and

0:13:49.120 --> 0:13:51.600
<v Speaker 1>Markets Authority, thank you very much for joining us on

0:13:51.640 --> 0:13:54.960
<v Speaker 1>Bloomberg Radio this morning, as we've had that breaking news

0:13:54.960 --> 0:13:58.680
<v Speaker 1>that Microsoft has submitted a new deal to be reviewed

0:13:58.720 --> 0:14:02.800
<v Speaker 1>by the CMA for its act position of the gamesmaker Activision.

0:14:04.120 --> 0:14:06.840
<v Speaker 1>This is Bloomberg Daybreak Europe, your morning where from the

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