News Archive

Tougher Internet rules to hit cable, telecoms companies

WASHINGTON (Reuters) – U.S. regulators are poised to impose the toughest rules yet on Internet service providers, aiming to ensure fair treatment of all web traffic through their networks.

The Federal Communications Commission is expected Thursday to approve Chairman Tom Wheeler’s proposed “net neutrality” rules, regulating broadband providers more heavily than in the past and restricting their power to control download speeds on the web, for instance by potentially giving preference to companies that can afford to pay more.

The vote, expected along party lines with Democrats in favor, comes after a year of jostling between cable and telecom companies and net neutrality advocates, which included web startups. It culminated in the FCC receiving a record 4 million comments and a call from President Barack Obama to adopt the strongest rules possible.

The vote also starts a countdown to lawsuits expected from the industry, which contends regulations will burden their investments and stifle innovation, potentially hurting consumers.

The FCC sought new net neutrality rules after a federal court rejected their previous version in January 2014. The ruling confirmed the agency’s authority over broadband but said it had improperly regulated Internet providers as if they were similar to a public utility. That contradicted their official classification as “information services” providers, which are meant to be more lightly regulated.

The agency’s new policy would reclassify broadband as more heavily regulated “telecommunications services,” more like traditional telephone service.

The shift gives the FCC more authority to police various types of deals between providers such as Comcast Corp (CMCSA.O) and content companies such as Netflix Inc (NFLX.O) to ensure they are just and reasonable for consumers and competitors.

Internet providers will be banned from blocking or slowing any traffic and from striking deals with content companies, known as paid prioritization, for smoother delivery of traffic to consumers.

The FCC is also expected to expand its authority over so-called interconnection deals, in which content companies such as Netflix Inc pay broadband providers to connect with their networks. The FCC would review complaints on a case-by-case basis.

Wheeler’s original proposal pursued a legal path suggested by the court. It stopped short of reclassifying broadband and so had to allow paid prioritization, prompting a public outcry and later Obama’s message.

With the latest draft, Wheeler sought to address some Internet providers’ concerns, proposing no price regulations, tariffs or requirements to give competitors access to their networks.

(Reporting by Alina Selyukh; Editing by Christian Plumb and Ken Wills)

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Allianz earnings and dividend disappoint, shares down

MUNICH (Reuters) – German insurer Allianz (ALVG.DE) raised its dividend by less than expected after earnings in its core property and casualty insurance businesses lagged and asset management stalled following client defections at its U.S. unit Pimco.

Shares in Europe’s largest insurer fell more than 3 percent on Thursday and were the biggest decliners in Germany’s blue chip DAX .GDAXI index after the company announced a dividend of 6.85 euros ($8) per share, up from 5.30 euros paid for 2013 but short of the median forecast of 7 euros in a Reuters poll.

Both net and operating profit also fell short of analysts’ average expectations in the full year.

“Geopolitical tensions, continued market volatility and a further decline in interest rates in 2014 led to lower global economic growth than expected,” outgoing Allianz Chief Executive Michael Diekmann said, giving his last set of full-year earnings before handing over to successor Oliver Baete.

Operating profit in the company’s main money-spinning division, property and casualty insurance, was hit by the need to plump capital cushions against potential claims in Brazil, at U.S. unit Fireman’s Fund and in Russia.

Asset management operating profit also fell short of expectations in the full year amid investor withdrawals and management turmoil at U.S. bond manager Pimco, including the defection of investment guru Bill Gross.

Cash withdrawals totaled $150 billion from Pimco’s U.S. open-end mutual funds in 2014. In January, investors pulled $11.6 billion from the Pimco Total Return Fund.


Retirement plans representing tens of billions of dollars in assets are turning to multiple investment strategies or team-managed funds to replace Pimco Total Return (PTTRX.O) and avoid the risks associated with being dependent on one manager.

Allianz said there was a clear trend toward receding outflows that continued in 2015 and that the unit should see further stabilization this year.

“Pimco has taken the long-awaited step from being an investment management company centered around its founder to becoming a much broader-based, modern company,” Diekmann said.

Group operating profit of 10.4 billion euros for the full year was short of the average expectation of 10.7 billion in the poll.

The company forecast the same operating profit of 10.4 billion euros for 2015, adding that the result could be 400 million euros higher or lower depending on the development of capital markets and large damage claims.

“The figures are no reason to rejoice and even a record dividend cannot make up for disappointing numbers,” said one Frankfurt trader.

Analysts polled by Reuters on average expect operating profit of 10.8 billion euros this year.

Full year net profit came in a 6.22 billion euros for 2014, compared with the average expectation of 6.45 billion in the Reuters poll.

(Reporting by Jonathan Gould; Editing by Keith Weir)

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Euro zone lending shows sign of turnaround as morale improves

FRANKFURT (Reuters) – Bank lending in the euro zone fell slightly in January but at a slower pace than a month earlier, suggesting the economy may be turning a corner as consumer morale picks up in the bloc’s largest economies.

European Central Bank President Mario Draghi said late on Wednesday that “all in all, the outlook is more positive than it was a few months ago” in the 19-country euro zone, which has been blighted by recession in the south and falling prices.

Sparse lending to firms continues to dog the economy, but data released by the ECB on Thursday showed the overall level of lending to households and firms in the euro zone fell by 0.1 percent in January from a year earlier, after a 0.5 percent drop in December. Lending has not risen since July 2012.

“We have been seeing an across-the-board improvement to banks’ willingness to lend and also in the demand for credit,” said Reinhard Cluse, an economist with UBS.

“We are making good progress in healing the European banking sector but we are coming from a very low base. The way to recovery is still long. We shouldn’t expect any miracles.”

German consumer sentiment jumped to its highest level in more than 13 years heading into March, a separate report showed, as low oil prices freed up consumer cash to spend on other things.

Consumer confidence hit a near three-year high in France this month and rose sharply in Italy, raising hopes for recovery of the stagnant economy.

The more positive tone comes as the ECB prepares to start printing money to buy sovereign bonds next month – a policy measure aimed at perking up the economy and lifting inflation, which is running at -0.6 percent, back into positive territory.

A European Commission report on Thursday showed that confidence in the euro zone’s economy strengthened for the second straight month in February.

There are also more positive signs from other countries in the south of the euro zone, which was battered by the bloc’s debt crisis and is going through a painful period of structural change as it tries to shape up to regain competitiveness.

Spain raised its 2015 economic growth forecast to 2.4 percent this week, from 2 percent, and said it could be higher.

In Greece, however, the picture remains bleak.

ECB data showed the level of deposits in Greek banks fell by 12.2 billion euros ($13.87 billion) to 155.4 billion euros in January, its lowest level in years.

A senior Greek banker, though, told Reuters on Thursday that more than 850 million euros in deposits returned to Greek banks when they reopened this week after Athens secured a fourth-month extension to its financial rescue.

(Writing by Paul Carrel; Editing by Susan Fenton)

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Samsung Elec to freeze salaries in South Korea for first time since 2009

SEOUL (Reuters) – Samsung Electronics (005930.KS) will freeze wages in 2015 for employees in South Korea for the first time in six years, after the world’s biggest smartphone maker saw profits fall in the face of rising competition.

The cost-cutting move is the latest by Samsung Electronics, which in January reported its first annual profit decline since 2011, as it lost market share to Apple Inc’s (AAPL.O) new iPhones and cheaper Chinese rivals like Xiaomi Inc [XTC.UL].

The wage freeze also comes as the electronics giant is widely expected to unveil its next Galaxy S smartphone at a March 1 event, hoping to revive sales growth momentum.

Samsung Electronics had already frozen 2015 wages for executives as part of belt-tightening measures, a company spokeswoman said, confirming media reports.

“The measures are likely to inject a sense of crisis into employees, who have enjoyed steady wage increases and hefty bonuses in recent years,” said Chang Sea-Jin, a business professor at Korea Advanced Institute of Science and Technology and author of the book “Sony vs Samsung”.

A Samsung spokesman did not elaborate on the reasons for the wage freeze. The company last froze wages in 2009, in the wake of the global financial crisis.

Samsung Electronics has 93,928 employees in South Korea as of 2013.

Robert Yi, Samsung’s head of investor relations, signaled earlier this month that the firm may cut dividends in 2015 after it hiked its payout by 40 percent and bought back stocks last year.

Samsung Electronics shares ended down 0.3 percent while the wider market .KS11 was up 0.1 percent as of 0613 GMT (0113 ET).

(Reporting by Hyunjoo Jin; Editing by Tony Munroe and Stephen Coates)

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Spain’s Iberdrola to buy UIL Holdings for about $3 billion

(Reuters) – Spanish utility Iberdrola SA (IBE.MC) will buy UIL Holdings Corp (UIL.N) for about $3 billion to create a new listed power and gas company and expand in the United States, where it hopes to offset falling profits at home.

A world leader in wind turbines, Iberdrola joins other European companies seeking to grow via acquisitions outside sluggish domestic markets. Last year, German engineer Siemens (SIEGn.DE) agreed to buy U.S. turbine maker Dresser-Rand (DRC.N).

Iberdrola’s earnings have been hit hard by Europe’s economic crisis, as well as by energy reforms in Spain, where new power generation taxes and renewable cutbacks dented profits.

As a result, Chairman Ignacio Sanchez Galan has vowed to slash domestic investments and expand abroad, especially in the United States and Mexico. The company already owns Scottish Power and U.S. Energy East, bought in 2006 and 2007, before Spain’s financial crisis.

JP Morgan analysts said the agreed deal, which values UIL at around 10 times forecast earnings before interest, tax, depreciation and amortization, was not cheap, but that UIL would contribute valuable growth projects and potential synergies. They have an “overweight” rating on Iberdrola’s shares.

Iberdrola will combine its U.S. unit with UIL and list the new company on a U.S. exchange. The companies did not say on which exchange it would be listed.

The Spanish firm said UIL shareholders would receive one share in the new company for each share they own and an additional cash payment of $10.50 per share, or $597 million.

The proposed deal implies a total value of $52.75 per share, including the cash component, representing a 25 percent premium to UIL’s closing price on Feb. 25.

Iberdrola also said the deal, which is expected to boost earnings per share and cash flow, would have a limited impact on solvency and would not require a capital increase to be funded.

Sources had told Reuters last year the group would likely fund any purchase by selling assets.

The new company will serve 3.1 million electric and gas customers across New York, Connecticut, Maine and Massachusetts and would invest $6.9 billion in electric and gas infrastructure over the next five years, the companies said.

UIL Chief Executive James Torgerson will be the new company’s CEO. Iberdrola and UIL will continue to have offices in New Haven, Connecticut, Massachusetts, Maine and New York.

The deal, unanimously approved by both companies’ boards, is expected to close by the end of 2015.

(Adds dropped word Siemens in paragraph two)

(Reporting by Supriya Kurane in Bengalaru and Jose Elias Rodriguez in Madrid; Editing by Julien Toyer and Mark Potter)

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GM cuts capacity, jobs in Indonesia, where Japanese dominate

BEIJING (Reuters) – General Motors (GM.N) will stop making GM-branded cars in Indonesia, a battleground for global automakers, closing an assembly plant, axing some 500 jobs and shifting its focus to sport utility vehicles (SUVs).

The U.S. auto giant, which was the first to set up a car assembly plant in Southeast Asia’s biggest economy eight decades ago, is effectively calling time on its attempt to wrestle market share from dominant Japanese rivals, led by Toyota Motor (7203.T).

GM Executive Vice President Stefan Jacoby, who oversees markets beyond the Americas, Europe and China, acknowledged GM got it wrong in going head-to-head with the Japanese in a market he dubs their “backyard”.

The move is part of a broader repositioning of the Chevrolet brand across Southeast Asia, emphasizing its American heritage for SUVs such as the Captiva and Trailblazer. The retreat also comes as GM drives into Indonesia with its Chinese partner, SAIC Motor Corp (600104.SS).

The partners plan to set up a manufacturing facility near Jakarta for their no-frills Wuling brand, but aren’t interested in taking over GM’s existing Bekasi plant, a person close to the joint venture said.

GM tried to take on Japanese rivals by locally producing its Chevrolet Spin, a strategic, small “people mover” van that has proved a winner in Brazil. But the Spin was too costly to make to be profitable in Indonesia as most of the parts had to be imported.

The Spin sold from around $12,000 and competed with Toyota’s Avanza. But it failed to take off as GM had hoped, making the production plant at Bekasi, just outside Jakarta, a financial burden. Production last year was less than a quarter of Bekasi’s annual capacity of 40,000 vehicles. GM sold just 8,412 Spin cars in Indonesia last year, and exported nearly 3,000.

“We could not ramp up Spin production to boost the volume as we had expected … although the product was really good,” Jacoby told Reuters. “The logistics chain of the Spin was too complex; we had low volume so we could not localize the car accordingly, and from the cost point of view we were just not competitive.”

GM will stop making the Spin in Indonesia by end-June and shutter the Bekasi factory, which employs around 500 people. The restructuring will leave GM Indonesia as only a sales unit.

A GM spokesman said there were no details to announce about the financial impact of the move and more information would be provided when first-quarter results are announced in April.

The overhaul aims to turn GM Indonesia “not only into profitability, but into a sustainable business model,” Jacoby said.


GM’s decision to dial back its solo presence in a market of 240 million people, where fewer than four in every 100 own a car, comes as global automakers retool their strategies for the world’s big emerging markets, including Russia and India.

Despite its long presence in Indonesia, GM sold fewer than 11,000 vehicles there last year, giving it a market share of below 1 percent, according to LMC Automotive. By contrast, Toyota and its Daihatsu (7262.T) affiliate sold more than 578,000 vehicles. Toyota and other Japanese makers together control more than 90 percent of the market.

GM Indonesia chief Michael Dunne is expected to leave his post within days, and will be replaced on an interim basis by Pranav Bhatt, chief financial officer for GM Indonesia. Dunne and Bhatt were not immediately available to comment.

The Bekasi plant was opened in 1995, but shut a decade later as Japanese brands tightened their grip on the market. It was re-opened two years ago as part of the Spin revival bid.

(Additional reporting by Ben Klayman in Detroit; Editing by Ian Geoghegan and Peter Galloway)

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Exclusive: China drops leading tech brands for state purchases

BEIJING (Reuters) – China has dropped some of the world’s leading technology brands from its approved state purchase lists, while approving thousands more locally made products, in what some say is a response to revelations of widespread Western cybersurveillance.

Others put the shift down to a protectionist impulse to shield China’s domestic technology industry from competition.

Chief casualty is U.S. network equipment maker Cisco Systems Inc (CSCO.O), which in 2012 counted 60 products on the Central Government Procurement Center’s (CGPC) list, but by late 2014 had none, a Reuters analysis of official data shows.

Smartphone and PC maker Apple Inc (AAPL.O) has also been dropped over the period, along with Intel Corp’s (INTC.O) security software firm McAfee and network and server software firm Citrix Systems (CTXS.O).

The number of products on the list, which covers regular spending by central ministries, jumped by more than 2,000 in two years to just under 5,000, but the increase is almost entirely due to local makers.

The number of approved foreign tech brands fell by a third, while less than half of those with security-related products survived the cull.

An official at the procurement agency said there were many reasons why local makers might be preferred, including sheer weight of numbers and the fact that domestic security technology firms offered more product guarantees than overseas rivals.

China’s change of tack coincided with leaks by former U.S. National Security Agency (NSA) contractor Edward Snowden in mid-2013 that exposed several global surveillance programs, many of them run by the NSA with the cooperation of telecom companies and European governments.

“The Snowden incident, it’s become a real concern, especially for top leaders,” said Tu Xinquan, Associate Director of the China Institute of WTO Studies at the University of International Business and Economics in Beijing. “In some sense the American government has some responsibility for that; (China’s) concerns have some legitimacy.”

Cybersecurity has been a significant irritant in U.S.-China ties, with both sides accusing the other of abuses.

A spokesperson for the U.S. State Department, when asked to comment on the Chinese state purchasing moves, said the United States was “very concerned that many aspects of China’s recent regulatory actions — touted as means to bolster cybersecurity —are neither effective cybersecurity measures nor consistent with the principles of free and open trade.”

U.S. tech groups wrote last month to the Chinese administration complaining about some of its new cybersecurity regulations, some of which force technology vendors to Chinese banks to hand over secret source code and adopt Chinese encryption algorithms.

The CGPC list, which details products by brand and type, is approved by China’s Ministry of Finance, the CGPC official said. The list does not detail what quantity of a product has been purchased, and does not bind local government or state-owned enterprises, nor the military, which runs its own system of procurement approval.

The Ministry of Finance declined immediate comment.

“We have previously acknowledged that geopolitical concerns have impacted our business in certain emerging markets,” said a Cisco spokesman.

An Intel spokesman said the company had frequent conversations at various levels of the U.S. and Chinese governments, but did not provide further details.

Apple declined to comment, and Citrix was not immediately available to comment.


Industry insiders also see in the changing profile of the CGPC list a wider strategic goal to help Chinese tech firms get a bigger slice of China’s information and communications technology market, which is tipped to grow 11.4 percent to $465.6 billion in 2015, according to tech research firm IDC.

“There’s no doubt that the SOE segment of the market has been favoring the local indigenous content,” said an executive at a Western technology firm who declined to be identified.

The executive said the post-Snowden security concerns were a pretext. The real objective was to nurture China’s domestic tech industry and subsequently support its expansion overseas.

China also wants to move to a more consumption-based economy, which would be helped by Chinese authorities and companies buying local technology, the executive said.

Policy measures supporting the broader strategy include making foreign companies form domestic partnerships, participate in technology transfers and hand over intellectual property in the name of information security.

Wang Zhihai, president and CEO of Beijing Wondersoft, which provides information security products to government, state banks and private companies, said the market in China was fair, especially compared with the United States, where China’s Huawei Technologies [HWT.UL], the world’s largest networking and telecoms equipment maker, was unable to do business due to U.S. security concerns.

Local companies were also bound by the same cybersecurity laws that U.S. companies were objecting to, he added.

The danger for China, say experts, is that it could leave itself dependent on domestic technology, which remains inferior to foreign market leaders and more vulnerable to cyber attack.

Some of those benefiting from policies encouraging domestic procurement accept that Chinese companies trail foreign competitors in the security sphere.

“In China, information security compared to international levels is still very far behind; the entire understanding of it is behind,” said Wondersoft’s Wang.

But Wang, like China, is taking the long view.

“In 10 or more years, that’s when we should be there.”

(Additional reporting by Beijing Newsroom, Noel Randewich in SAN FRANCISCO and David Brunnstrom in WASHINGTON; Editing by Will Waterman)

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Boeing, FedEx battle back vs U.S. airlines on Gulf competition

(Reuters) – A push by three U.S. airlines to curb competition from Gulf state carriers has triggered a sharp response from other powerful U.S. aviation companies including Boeing Co (BA.N) and FedEx Corp (FDX.N), potentially complicating the airlines’ campaign for Obama administration support.

Delta Air Lines Inc (DAL.N), United and American Airlines have asked the White House to look into the financial statements of competitors from Qatar and the United Arab Emirates, which they accuse of receiving more than $40 billion in government subsidies since 2004.

But calls for the United States to tamper with Open Skies agreements with the Gulf nations have angered other U.S. companies that benefit from the pacts. The agreements eliminate barriers that would block some FedEx operations and slow the expansion of carriers like Emirates that have showered Boeing with orders.

A counteroffensive from Boeing, Fedex and others could make it easier for the White House to resist renegotiating the agreements.

“I think the entry into the fray of Boeing and the others as countervailing pressures to the airlines will make it easier politically for the administration to do what I believe the Department of Transportation wants to do, namely, to continue to pursue its successful Open Skies strategy,” said New York University law professor Michael E. Levine.  

Boeing, which like European rival Airbus (AIR.PA) has filled its order book with commitments from Gulf carriers, opposes drastic changes to the Qatar and U.A.E. agreements.

“Boeing supports a commercial-aviation industry based on open and fair competition, and Open Skies has long been a key factor in this, benefiting both U.S. and international airlines,” Boeing spokesman Jim Proulx said in a statement.

Other companies were more blunt in taking on the top U.S. airlines, long big Boeing customers.

“The U.S. should not capitulate to the interests of a few carriers who stand ready to put their narrow, protectionist interests ahead of the economic benefits that Open Skies provides,” David Bronczeck, chief executive of FedEx’s Express air cargo unit said in a Feb. 18 letter to the heads of the U.S. Departments of State, Transportation and Commerce.

JetBlue Airways Corp (JBLU.O), which has a codeshare agreement with Emirates, also wrote a letter to the same departments opposing tampering with Open Skies.

Delta, United Continental Holdings Inc (UAL.N) and American Airlines Group Inc (AAL.O) say in the report – which has been reviewed by Reuters but not yet been made public – that they support Open Skies agreements but not their abuse through subsidies.

Yet the top U.S. carriers have long been ambivalent toward liberalizing air travel.

“The major U.S. carriers have opposed Open Skies and deregulation all along the way, even from the word go, and yet have been major beneficiaries due to domestic consolidation and also globally in terms of market access,” said Peter Harbison, chairman of Sydney-based CAPA-Centre for Aviation, an independent aviation consultancy.


Emirates, Qatar Airways and Etihad Airways deny the U.S. airlines’ accusations about unfair subsidies. So far, the Obama administration says it is reviewing the U.S. airlines’ claims but has made no decisions.

In an interview with Reuters Wednesday, Emirates [EMIRA.UL] President Tim Clark hinted at possible legal action over potential commercial harm done by the U.S. airlines’ campaign. The clash between Delta and the Gulf airlines has taken a caustic turn, including remarks by Delta’s chief executive that were perceived as linking the Gulf carriers with the Sept. 11 attacks on the United States in 2001.

Clark also called his U.S. rivals’ service “shoddy” and said they would do better to focus on improving their own product.

U.S. consumer groups such as the Business Travel Coalition agree that Delta and its U.S. cohorts have only themselves to blame for the market share loss, a contention disputed by Delta.

Still, the U.S. airlines may have one trump card to play in the form of Americans for Fair Skies, an organization opposed to Gulf subsidies that is the project of former Air Line Pilots Association President and former Delta captain, Lee Moak.

“Protectionism is making a revival as some of the powerful national airlines exert strong pressure on their governments,” Harbison said. “Have Open Skies reached their limits?”

(Additional reporting by Nick Carey in Chicago and Andrea Shalal and David Morgan in Washington; Editing by Christian Plumb)

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Ford starts export production of 2015 Edge at Canada plant

(Reuters) – Ford Motor Co (F.N) said on Thursday it began production of the 2015 Ford Edge at its Oakville Assembly plant in Canada for export to more than 100 countries.

The No.2 U.S. carmaker said it added 400 employees to the 1,000 announced last year at the plant to support the global launch.

The Ford Edge will be exported to Asia, Africa and the Middle East from North America and South America.

The car would also be exported to Western Europe for the first time with a right-hand drive and a diesel engine, Ford said.

The company said it invested C$700 million ($563.2 million) to retool and expand the plant in Oakville, Ontario.

The plant, operating since 1953, makes the Ford Flex and the Lincoln MKT and will begin production of the new 2016 Lincoln MKX this year, the company said.

(Reporting by Rohit T. K. in Bengaluru)

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