Global Business |Update|
(A weekly update on Global Business )
Skyline Business School
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Issue 85

 

Global Business Update

(2nd July---8th July)

 

Contents

 

Global Corporate

1 Vodafone in Ghanaian mobile deal

2 Air France eyes move to railways

3 B&B 'faces fee for failed deal'

4 GM shares close below key $10 mark

5 Wal-Mart to pay $6.5M in labor case

6 Coca Cola to invest USD 250 mn in India

7 Daimler to set up truck plant in Chennai

 

Global Outsourcing

8 Indian outsourcing firm Quattro and D.E. Shaw buy game-outsourcing firm Babel

9 Outsourcing in garment industry undermines compliance

10 SAIC Awarded $19M Data Outsourcing Contract

11 CSC Signs New $22 Million IT Outsourcing Contract With Urenco

12 Students in Australia outsourcing homework to India

13 HCL to deliver Engg outsourcing services to EADS

 

Global Economy
14 Iran optimism steadies oil price

15 Eurozone rates increase to 4.25%

16 Dow Jones becomes a bear market

17 US loses 62,000 jobs during June

18 Recession in Asia is 'unlikely'

19 Rising costs to dominate G8 talks

 

Global Markets
20 Oil hits record high of $146 per barrel

21 India garners $4 bn from 16 IPOs

22 Mkts crash, Sensex closes 570 pts down

23 MTN shares jump on Reliance talks

24 Oil eases to $ 143.73 after Iran offers talks

 

Global Corporate

 

1 Vodafone in Ghanaian mobile deal
Mobile phone firm Vodafone is to expand its presence in Africa by buying a controlling stake in Ghana Telecom for £452m ($900m). The British firm will acquire 70% of the currently state-owned firm with the government retaining a 30% interest. Currently Ghana's third-largest mobile provider with 1.4 million customers, Vodafone said there was substantial potential for future growth. Rapid uptake in mobile use on the continent has attracted foreign firms. Vodafone already owns half of Vodacom, the leading mobile business in South Africa, Tanzania, Lesotho and the Democratic Republic of Congo. India's Reliance Communications is currently in merger talks with rival South African firm MTN. The investment potential of mobile phones in Africa was illustrated by the recent market frenzy surrounding the partial flotation of Kenyan provider Safaricom.
3rd July 2008, www.bbc.co.uk

 

2 Air France eyes move to railways
Air France is holding talks on a joint venture that could lead to it offering high-speed rail travel. The airline confirmed reports it was discussing a possible tie-up with Veolia, a French utility firm that also runs several rail services. Commentators suggest such a deal would enable the airline to cut fuel costs by moving some services onto the railways. Under the plans Veolia would run trains from Air France's hub airport in Paris to other European destinations. We are reviewing the feasibility and possibility of such a project, but it is too early to discuss its terms, an Air France spokesman told the Reuters news agency. The joint venture is likely to remain focused on international travel as, under European Union plans, legislation is set to free up the international rail passenger market in 2010. Veolia has previously run public rail franchises in several countries worldwide under the now-defunct Connex brand. It now runs continental Europe's largest private freight service and several rail connections.

4th July 2008, www.bbc.co.uk

 

3 B&B 'faces fee for failed deal'

Bradford & Bingley is set to pay a "success fee" to its advisers despite the failure of a rescue deal with a US private equity group, a report says. As well as its basic fee, B&B will pay Goldman Sachs an additional amount on the completion of a new funding package, the Sunday Telegraph reported. Goldman Sachs was behind plans for B&B to raise £400m with the sale of a 23% stake to Texas Pacific Group (TPG). But the deal broke down, forcing B&B to sell £400m of shares in a rights issue. News of the change of plans led to shares in the troubled lender falling more than 18% on Friday, dipping below the rights issue price level. A rights issue is when a company offers shares at a discount to existing investors, giving them the opportunity to increase their holdings and raise money for the company to use to shore up its balance sheet.
5th July 2008, www.bbc.co.uk

 

4 GM shares close below key $10 mark
Shares of General Motors Corp. plunged Wednesday to close below $10 for the first time in more than half a century, on worries about the company's cash needs and speculation about a possible bankruptcy protection filing down the road. GM (GM, Fortune 500) shares fell $1.77, or 15.1%, to close at $9.98. The stock's session low of $9.96 marked its lowest point since Sept. 13, 1954, when it hit $9.92, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes. David Healy, an auto analyst with Burnham Securities, said the $10 mark is a purely psychological one, but highlights the automaker's dramatic share-price plunge since the beginning of the year, along with worries that the company may have to file for bankruptcy. GM shares are down about 60% this year.

2nd July 2008, www.cnn.com

 

5 Wal-Mart to pay $6.5M in labor case
A judge has ruled against Wal-Mart in a class-action lawsuit, saying the discount retailer violated state labor laws more than 2 million times, including cutting worker break time and "willfully" allowing employees to work off the clock. Dakota County Judge Robert King Jr. on Monday ordered Wal-Mart Stores Inc. to pay $6.5 million in compensatory damages, but Wal-Mart could end up paying more than $2 billion after a jury in October considers civil penalties and punitive damages. We believe that this award not only helps the individual clients, but it also sends a message to Wal-Mart that it has to pay for its mistakes, said Justin Perl, an attorney representing the former Wal-Mart employees named as plaintiffs in the lawsuit. Wal-Mart spokeswoman Daphne Moore said Tuesday that the Bentonville, Ark.-based company disagrees with portions of the judge's decision and is considering an appeal.
4th July 2008, www.cnn.com

 

6 Coca Cola to invest USD 250 mn in India
Revealing its plan to invest USD 250 million over the next three years in the country, beverage giant Coca Cola on Friday said India figured strategically in its global gameplan. President and CEO of Coca Cola India Atul Singh said, "We are committed to investments in India. The company will invest USD 250 million in the country over the next three years." He said that the BRIC nations (Brazil, Russia, India and China) are strategic countries on which the company is focusing. The company would focus on the sparkling drink, juice and its drinks, water and Georgia tea and coffee segments. He said that although Coca Cola has 400 brands under its fold globally, the company would introduce newer brands in India at an opportune time. In the sparkling drink category in India, Coca-Cola is the market leader with a market share of over 60 per cent.
4th July 2008, www.cnn.com

 

7 Daimler to set up truck plant in Chennai
Daimler Hero Commercial Vehicles, the joint venture between Germany's Daimler and the Munjals-promoted Hero Group, on Monday said it would set up its manufacturing unit in Chennai as part of its Euro 700 million investment plan over the next five years. "The Indo-German joint venture will soon begin the construction of a new factory in Chennai, where it will produce commercial vehicles under a new brand name for the Indian volume market and exports," DHCV said in a statement. The plant, which would be functional in 2010, would produce up to 70,000 trucks in its initial phase of operation. The company said it plans to export from the plant to markets whose product equirements are similar to those of the Indian market. The investment plan is valued at about Rs 4,500 crore. The company said it has signed a memorandum of understanding (MoU) with the Tamil Nadu government for setting up the plant.
7th July 2008, www.financialexpress.com

 

Global Outsourcing

 

8 Indian outsourcing firm Quattro and D.E. Shaw buy game-outsourcing firm Babel

Indian outsourcing firm Quattro and investment firm D.E. Shaw Group have bought a majority stake in the video game outsourcing firm Babel. The purchase price wasn’t disclosed. Founded in 1999, Babel has grown up as a company that game publishers hand off tasks to, from video game testing to changing the language in a game for foreign markets. Babel, based in Brighton, England, now has 500 employees who do work for 19 of the 20 largest video game companies. Alvy Williams, founder of Babel, saw that the video game industry was becoming a huge business and it needed the kind of outsourcing infrastructure that film companies have relied upon for many years. In Hollywood, a major studio doesn’t do its own movie special effects. It hires a special effects company. The model is called “distributed development.” In the game industry, Babel wanted to provide everything a game publisher didn’t want to handle internally, Williams said. That includes tasks such as testing, localizing a game, and adapting it to cell phones or other game platforms. Many of those tasks are seasonal and so it doesn’t make sense for a game publisher to have such employees on its payroll throughout the year. Under the deal, Quattro and D.E. Shaw will provide more capital to expand Babel’s business.
2nd July 2008, www.tutorial-reports.com

 

9 Outsourcing in garment industry undermines compliance
US officials have expressed concerns about the practice of outsourcing by Bangladeshi apparel makers, saying it (outsourcing) sometimes undermines compliance issues. However, local garment manufacturers said they outsource jobs only from members of BGMEA (Bangladesh Garment Manufacturers and Exporters Association) and BKMEA (Bangladesh Knitwear Manufacturers and Exporters Association), who are compliant with US buyers' requirements. A team of US Customs and Border Protection (CBP) officials recently inspected around two dozens readymade garment factories in Dhaka and Chittagong and found these units outsource their products from other factories. CBP is one of the Department of Homeland Security's largest and most complex components, with a responsibility for securing and facilitating trade and travel while enforcing hundreds of US regulations, including immigration and drug laws. When asked, a leading garment manufacturer said many Bangladeshi garment factories need to outsource their jobs as an individual they have limitations to complete big buying orders. We sometimes receive orders from a single buyer which cannot be completed at our own facility within the set time limit. For this reason we need to outsource, he added.
3rd July 2008, www.tutorial-reports.com

 

10 SAIC Awarded $19M Data Outsourcing Contract
Science Applications International Corporation said it has been awarded a contract by PNM Resources to provide data outsourcing services worth $19 million if all options are exercised.  Under terms of the agreement SAIC will provide services including production control, data backup, recovery and incident management, operations monitoring and notification, on-call support, logistics and health and safety management. Work will be performed primarily in Albuquerque, New Mexico, and Little Rock, Arkansas. SAIC is based in San Diego and provides scientific, engineering, and technology applications for customers in national security, energy, critical infrastructure and health arenas.

3rd July 2008, www.tradingmarket.com

 

11 CSC Signs New $22 Million IT Outsourcing Contract With Urenco
CSC announced today that it has signed a new information technology (IT) outsourcing contract with Urenco, a leading supplier of enriched uranium to nuclear power utilities worldwide. The new six-year agreement, which is valued at $22 million (10.9 million pounds sterling), follows a seven-year, 23 million pounds sterling IT outsourcing contract Urenco awarded to CSC in March 2007. CSC currently provides Urenco with a full range of IT services, including desktop support, help desk services, applications development and network support, in support of its global transformation program to align best-of-breed processes across all of its plants. With the new agreement, CSC will expand coverage to include Urenco's wholly owned subsidiary LES, which is responsible for the building and operation of Urenco's new National Enrichment Facility in New Mexico, U.S. The new facility, which is Urenco's first U.S.-based plant, is the first major commercial nuclear facility to be licensed in the U.S. in 30 years and is scheduled to open in 2009. CSC also supports the company's operations in Washington, D.C., and in the UK, the Netherlands and Germany.
5th July 2008, www.tutorial-reports.com

 

12 Students in Australia outsourcing homework to India

It is not just companies sending work offshore, computer science students in Australia are outsourcing assignments to programmers in India and other countries. Students are willing to shell out anything between A$100 and several hundred dollars for assignments put to tender on websites, where coders bid based on the time and effort required to complete the task. For unwilling students, not wanting to do their homework, sites such as RentACoder and Kasamba maintaining a network of low-cost coders around the world, have proved a boon. Yes, we are aware that some of our assignments have been posted to these sites and we have identified some individual students and applied sanctions through the university's misconduct policies and processes," Professor David Wilson, Dean, Department of Information Technology at the University of Technology, Sydney (UTS) said.
4th July 2008, www.tutorial-reports.com


13 HCL to deliver Engg outsourcing services to EADS
European aerospace group EADS has selected India’s fifth largest IT services exporter HCL Technologies (HCL) as a preferred supplier of product engineering services and technical publication services. The company has short listed 28 preferred and strategic suppliers for providing engineering services. The move is in line with the company’s strategy to reduce costs along with expanding its global competitiveness and global industrial reach. As per the agreement, HCL will deliver services through its Indian design center in Bangalore. EADS invests USD 2 billion annually on engineering services including research, modeling, flight physics, and design. Headquartered in the Netherlands, EADS is an aerospace company, formed by the merger of DaimlerChrysler Aerospace of Germany, Aérospatiale-Matra of France, and Construcciones Aeronáuticas of Spain. The company specializes in developing and marketing civil and military aircraft as well as missiles, space rockets, satellites, and related systems.
6th July 2008, www.tutorial-reports.com 

 

Global Economy

 

14 Iran optimism steadies oil price
The price of oil fell back on Friday, on hopes Iran would react positively to proposals to resolve a dispute over its nuclear development programme. However, prices stayed near the highs of more than $146 seen on Thursday. US light, sweet crude was down $1.19 to $144.10 a barrel, while London's Brent slipped $1.15 to $144.93. The US, China, Russia, Germany, the UK and France have offered Iran trade and other incentives if it suspends its uranium enrichment programme. Iran said it had responded to the proposals, and had delivered its answer to the European Union's foreign policy chief Javier Solana, without giving any further details. A number of factors have combined to push oil prices higher, though some of the factors, such as the problems with Iran, have eased slightly. Some observers have blamed speculators for pushing oil prices higher. Others argue that oil reached its record price on Thursday because of investors buying into the commodity ahead of the US independence day holiday.
3rd July 2008, www.bbc.co.uk

 

15 Eurozone rates increase to 4.25%

Eurozone interest rates have increased for the first time in a year in an attempt to control inflation, which is at record levels. Rising food and fuel costs encouraged the European Central Bank (ECB) to put its key rate up from 4% to 4.25%. Inflation in the eurozone hit an annualised rate of 4% this week, the highest rate since official records began in 1996. The move comes despite concerns that the eurozone economy is slowing. European markets had expected the rate rise - but shares rose in reaction to comments by ECB president Jean-Claude Trichet that were interpreted as a signal that this could be a one-off rate rise rather than the first of a series. "The monetary policy stance after today's decision will contribute to achieving our objective of price stability," Mr Trichet said. "I have no bias and we are never pre-committed." The statement following the rise was "nowhere near" as hawkish as most had expected, said Henk Potts, a strategist at Barclays Stockbrokers.
4th July 2008, www.bbc.co.uk

 

16 Dow Jones becomes a bear market

The Dow Jones Industrial Average closed more than 20% below its October 2007 peak on Wednesday, meaning it is officially a bear market. The blue-chip index fell 166.8 points or 1.46% to 11,215.5, which is 21.0% below its 14,198.1 close on 11 October. The biggest drag on the index was General Motors, which fell below $10 a share for the first time since September 1954. The S&P 500 index closed just shy of 20% below its peak levels. Twenty percent is just kind of an artificial line in the sand," said Keith Hembre from First American Funds. "It's more a validation that all hell has already broken." One surprising thing about the entry into bear market status is the reminder that the Dow Jones was so high in October, when the sub-prime crisis was already well underway. The peak came less than a week after the investment bank Merrill Lynch revealed $5.6bn (£2.8bn) in sub-prime losses. Analysts are now looking for factors that will return the market to such levels, but some are blaming the record oil prices for the continuing falls. "The market needs a positive catalyst. It could be the jobs number," said Mark Pado at Cantor Fitzgerald.
5th July 2008, www.bbc.co.uk

 

17 US loses 62,000 jobs during June  

US firms cut workers for a sixth month in June, official figures show, stoking fears that the world's largest economy was heading towards a recession. The economy lost 62,000 non-farm payrolls in June, the Labor Department said. It follows a newly revised figure of 62,000 jobs also lost in May. Despite the reduction in payrolls, the unemployment rate was steady at 5.5%. US companies have been reluctant to add staff amid higher oil and food prices, and slowing economic growth. Gary Thayer of Wachovia Securities said that the payroll figures showed that the labour market was still very soft. "We're not seeing dramatic job cuts, but clearly companies are trying to hold the line on costs," he said. "It suggests that it's still a rough economy." The US economy has shed jobs at an average rate of 73,000 a month, marking a total of 438,000 job losses so far this year. Some economists are already predicting the unemployment rate will climb to 6% or higher in early 2009.
6th July 2008, www.bbc.co.uk

 

18 Recession in Asia is 'unlikely'  

Growth in Asian economies may slow this year, but a recession is unlikely, according to Haruhiko Kuroda, head of the Asian Development Bank. He said the region's biggest concern was inflation, even though many countries, such as Taiwan and Vietnam, have raised interest rates this year. Mr Kuroda said there were dangers of destabilisation due to the growing gap between US and Asian interest rates. But he said a repeat of the Asian currency crisis was unlikely. I'm reasonably confident that nothing like the Asian currency crisis 10 years ago would happen in the region, simply because many emerging economies in Asia have accumulated a large amount of foreign exchange reserves," he said. There is some disagreement about the root causes of the Asian financial crisis that began in 1997, but differentials between US and Asian interest rates are likely to have been involved. US interest rates currently stand at 2.0% while rates in India, for example, stand at 8.5%. This means investors might consider using US dollars to buy rupees to take advantage of better returns.
7th July 2008, www.bbc.co.uk

 

19 Rising costs to dominate G8 talks

Rising food and fuel prices are topping the agenda for leaders of the world's major industrialised nations as they start a three-day summit in Japan. Group of Eight (G8) leaders held talks with African leaders on the first day. Food prices are worsening the problems of poverty in Africa while G8 leaders are being accused of going back on their promises to provide extra aid. UK Prime Minister Gordon Brown is expected to call for a doubling of food production in Africa. The G8 summit opened at a resort on the northern island of Hokkaido. Leaders from member nations - Britain, Canada, France, Germany, Italy, Japan, Russia and the United States - will be joined by counterparts from some 15 other countries, including eight African states.
6th July 2008, www.bbc.co.uk