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Wednesday, 14 August 2024
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European Business News (EBN), 97-05-14European Business News (EBN) Directory - Previous Article - Next ArticleFrom: The European Business News Server at <http://www.ebn.co.uk/>Page last updated Wed, May 14 6:29 PM CETCONTENTS
[01] Waigel is expected to announce a German budget freezeGerman Finance Minister Theo Waigel may announce a budget freeze tomorrow to appease public opinion after the release of the German government's tax estimates for 1997, a senior German source said.'A budget freeze might well be on the cards - this would be a good way to soothe public opinion,' the source said. He added that though a budget freeze would do little to help German fiscal consolidation, it would pre-empt the criticism to be expected from the opposition Social Democrats and would placate those worried about German fiscal efforts. Waigel is expected to announce a projected shortfall in tax revenue approaching 20 billion marks ($12 billion) for this year. The source noted that the tax shortfall is likely to be in line with current market expectations. 'Everybody knows we're in for another tax loss, and the range of the loss is nothing new,' the source said. 'On that front, we won't see a dramatic development,' he said. Earlier today, Waigel said the shortfall would be above 10 billion marks, but declined to give a more specific figure. Previously, the Finance Minister had insisted the shortfall would only total around 8 billion marks. The source noted, however, that a freeze, though only a superficial measure, would be an appropriate reaction to the announcement. He noted that Waigel is unlikely to announce increases in mineral oil tax or value-added tax Thursday, as these would be unpopular decisions with the voting public - particularly in the runup to the 1998 German federal elections. 'I can't see any isolated tax increases (for the moment),' the source said, adding that such a move would mean political suicide for the Free Democratic junior government coalition party. The source also said that privatisation's are likely to be on the cards in the near future as a means of reducing Germany's national debt. A second tranche of Deutsche Telekom shares will probably be high on the privatisation agenda, he said. Earlier today, the finance ministry said it is considering the divestment of a further stake in the majority-state-owned telecommunications company this year. [02] Bonn may accelerate the sale of its remaining holdings in Deutsche TelekomGermany's Finance Ministry said it may speed up the sale of its remaining 75% stake in Deutsche Telekom.Finance Minister Theo Waigel told reporters in Bonn that 'it is conceivable that parts of the privatisation of Telekom could be brought forward.' Waigel told journalists in Bonn. A Finance Ministry spokeswoman stressed, however, that any sale would be sure to ensure that there would be no damage either to the financial situation of the company or to its shareholders. The company had originally planned to sell its remaining 2 million Deutsche Telekom share in the year 2000. But the government said it may start to sell some of that holding beginning this year. The revenues could be used to reduce the level of Germany's outstanding public debt, but not the current budget deficit, according to a report in daily German newspaper Handelsblatt. It's unclear, however, how the German government could push the sale through in 1997, since a law requires that the remaining 75% of Telekom's shares remain in government hands until the year 2000. Industry insiders note that one option may be to park a portion of the shares with the Kreditanstalt fuer Wiederaufbau, the government-owned reconstruction lending agency. That way, the stake would technically remain in the government's hands but the proceeds from the sale would flow to the finance ministry's coffers, they say. That's basically what the government did in 1994 with shares in air carrier Deutsche Lufthansa, when Bonn wanted to reduce its stake to below 50% but was stymied by Lufthansa employee pension-plan considerations. The stake was sold to the KfW, and Bonn pocketed the funds while continuing to negotiate with Lufthansa over its pension liability. The 2 billion Telekom shares owned by the government correspond at the current price of about 40 Deutsche marks a share to a total of about 80 billion marks ($47 billion). The sale of a tenth of the government's share would send about 8 billion marks into the finance ministry's coffers. However, flooding the market with 200 million shares could simultaneously dilute Telekom's share price, market watchers say. In early Frankfurt Stock Exchange trading, Bonn may accelerate the sale of its remaining holdings in Deutsche Telkom had dropped 2.4%, or 0.98 marks to 39.15 marks. [03] EU commission gives conditional go-ahead to BT, MCI mergerThe European Union Commission gave its conditional blessing to the merger of British Telecommunications and MCI Communications, partially paving the way for the creation of a global telecommunications giant, to be called Concert.The green light was accompanied by four conditions agreed to by the companies, concerning trans-Atlantic submarine cable capacity and teleconferencing where BT and MCI were perceived to pose competitive threats. And the merger has still to win the approval of the U.S. Federal Communications Commission, where a decision is expected around the end of the third quarter. The European regulator's chief concern is merged company Concert's domination of trans-Atlantic cable capacity - currently at around the 30% to 40% level. Consequently, the Commission has decreed that other international telecommunications operators get access at 'true cost' to submarine cables operated by BT and MCI. A second aspect of the ruling is that Concert must sell BT's transatlantic capacity currently leased to other operators at their discretion. The third aspect is that Concert is forced to sell MCI's audioconferencing business in the U.K. Though teleconferencing is a small market, the Commission said it wants to forestall BT and MCI domination. Finally, the new telecommunications giant must divest some circuits currently owned by BT so that other operators can provide international voice telephony services on the U.K.-U.S. route on an end-to-end basis. [04] Russia and Nato reach pact on expansion of Western AllianceNATO Secretary-General Javier Solana and Russian Foreign Minister Yevgeny Primakov reached an agreement on plans to expand the Western Alliance and allay Russian opposition, officials said.Russian and NATO officials said the two sides had reached broad agreement on various issues after two days of talks. 'Major progress on key issues of the Russia-NATO document, including its military aspects, has been achieved,' the Russian Foreign Ministry said in a brief statement. The officials gave no immediate details on the agreement, saying it was being sent to the governments involved. The breakthrough came after Solana conferred Wednesday by telephone with Russian President Boris Yeltsin. Primakov and Solana were holding talks for a second day on a document defining relations between NATO and Russia after the alliance's proposed expansion. The talks began Tuesday. Russia bitterly opposes the alliance's plans to offer membership to former Soviet satellites, but cannot block the expansion. The Czech Republic, Poland and Hungary are expected to be invited to join the alliance this summer. In an effort to ease Russian concerns, the two sides have been trying to reach a security agreement. Russia wants the document to be ready for signing at a Russia-NATO summit in Paris on May 27. Among remaining problems on the proposed agreement, Russia cited NATO's refusal to guarantee that it won't put nuclear weapons on the territories of new members. The alliance says it has no plans to do so, but won't rule out such a move in the future. Moscow and NATO also differ about possible limits on the number of combat troops that NATO can move to territories of new members. The sides have agreed that the alliance won't station 'significant' numbers of troops in new members states, but they disagree on what qualifies as 'significant.' NATO also declined to promise that it won't build military bases on the territory of new members, including airfields, communications and air defence installations. However, negotiators have agreed to create a new Russia-NATO council that will allow Moscow to have a direct voice - but not a vote - in decisions made by the North Atlantic Treaty Organization. Whatever shape the agreement takes, the leaders of all 16 NATO members will have to approve it before the signing. [05] US April producer prices fall unexpectedlyFalling energy prices helped push U.S. producer prices of finished goods down 0.6% in April, the fourth consecutive month of declines and the biggest drop since 1993.Last month's PPI, less the volatile food and energy components, fell an adjusted 0.1% after rising 0.4% in March. The drop in overall producer prices differed significantly from analysts' expectations. A Dow Jones Newswires' survey of 24 economists published Tuesday projected no change in April producer prices. Those same economists expected a 0.1% increase in core prices. The producer price index for intermediate goods declined 0.3% in April, after falling 0.6% the previous month. The index for crude goods fell 0.9% after posting a decline of 6.9% in March. The latest month's fall in producer prices marks the index's fourth consectutive drop. The last time prices fell in four consecutive months was during the months of May through August of 1993. The 0.6% drop in April producer prices was the largest since the index posted a 0.8% decline in August 1993. [06] Labour's package of reforms outlined as the Queen opens ParliamentThe Queen has opened a new session of parliament for the United Kingdom - the first time a Labour government has been in control since 1979.A programme of laws and reforms aimed at making a decisive break with 18 years of Conservative rule in Britain was outlined in a brief speech given by the monarch. Officials said the far-reaching legislative package reflected the priorities of a 'people's government' and would begin the process of fulfilling the core election commitments that swept Labour to power on May 1. 'The new government will govern for the whole nation and give everyone -- regardless of background -- the chance to succeed in life,' Blair's office said. The package of bills tackled Labour's five main manifesto pledges -- to cut primary school class sizes, shorten hospital waiting lists, mete out swifter justice for persistent juvenile offenders, get 250,000 young people off welfare into work, and to create the conditions for lasting prosperity. But there were also a number of eye-catching constitutional reforms to decentralise power, make government more transparent and clean up politics after a string of tawdry sex and money scandals that Labour says sullied the previous administration. Referenda will be held to approve plans for a tax-raising parliament in Scotland and a less powerful assembly in Wales. Regional development agencies will be created in England and Londoners will get the chance to elect their own mayor, more than a decade after former Conservative prime minister Margaret Thatcher abolished the left-leaning Greater London Council. In another break with the Conservatives, the European Convention on Human Rights will be incorporated into British law, allowing citizens to seek redress in domestic courts instead of having to turn to the European Court of Human Rights in Strasbourg. Foreign funding of political parties will be banned, data protection rules strengthened and a 'white' policy paper will be published as the first step toward implementing a Freedom of Information Act. Two education bills form the centrepiece of the legislative programme, reflecting Blair's mantra during the election campaign that education would be the passion of his government. One bill aims to pay for a reduction in primary school class sizes by phasing out financial help for poorer children to attend private schools. A second aims to raise school standards, which Education Secretary David Blunkett believes have fallen dangerously below those of many of Britain's main economic competitors. The two bills together make up what Blair believes is the 'most fundamental attack on under-achievement since the war', according to an aide. Other important measures will establish a minimum wage and dismantle the Conservatives' internal free market in the health service, which Blair believes has spawned a costly bureaucracy and led to a discriminatory two- tier service. The programme is the first to be presented by a labour government since 1978. With a majority of 179 in the 659-seat House of Commons, Blair on paper should have no problem in implementing it. [07] Lufthansa, United Airlines and three others form Star AllianceUnited Airlines, Lufthansa Airlines, Scandinavian Airlines System, Air Canada and Thai Airways International have formed an international alliance that will link frequent flier programs and other services.In a joint press release, the airlines said the benefits from their ''Star Alliance'' network include allowing frequent flyers on network flights to accumulate and redeem mileage points through each member's program. Qualified passengers will also enjoy reciprocal priveleges at 179 member airport lounges around the world, the airlines said. The five airlines said they each have extensive domestic and international route networks, with more than 210,000 employees and flights to 578 cities in 106 countries. The member airlines said Varig Brazilian Airlines will join the network by October and other airlines will join in the near future. Although alliances between airlines are hardly new, the agreement by the five carriers represents a new level of cooperation and coordination. Many industry experts have predicted that perhaps 10 such groupings of airlines are likely to dominate the worldwide industry in 10 or 15 years. ''It moves the ball forward,'' said Jon Ash, managing director of Global Aviation Associates, a consulting firm in Washington. ''What you're really seeing is an increasing level of sophistication of the alliances.'' The airlines in the Star Alliance are studying myriad ways to save money and bolster revenue, ranging from coordinating flight schedules and computer reservations systems to storing aircraft spare parts for one another. While the member airlines will maintain their current separate identities, they will share a new logo and the theme line, ''The Airline Network for Earth,'' to help market the alliance, which Varig Airlines of Brazil plans to join in October. Airlines around the world have been gradually increasing their ties to other carriers to jointly market flights. By combining their route networks, they can appear to offer seamless service between far-flung destinations. [08] Cable & Wireless posts 12% gain in '96 pre-tax profitCable and Wireless, Britain's second biggest telecommunications company reported a 12% gain in annual pre-tax profits to a record £1.42 billion ($2.3 billion). C & W said that improved demand and productivity gains were behind the rise.Operating margins rose one percentage point to 25%, while operating cash flow hit a record £2.227 billion, the company said. The company raised its total dividend 11% to 11.1 pence for the year to March 31. 'Balanced global growth is our objective,' said chief executive Richard Brown. 'We are focusing on major opportunities where we can build service in depth and exercise real operating influence. 'We are seizing opportunities to expand our revenues in fresh, innovative ways,' he added. The group's jewel in the crown - a near 60% stake in lucrative Hong Kong Telecommunications - increased its links to the potential huge growth opportunity of China last week when a stake was transferred from a more independent Chinese firm to one which analysts say reports directly to China's State Council. Analysts say that although the transfer of a 7.7% stake from CITIC Pacific to China Everbright is not a big deal, there make be further Chinese investment in Hong Kong Telecom, combined with new opportunities for the company on the Chinese mainland. A China deal might also incorporate a tie-up with a global alliance, some analysts say. Global One, the partnership between Deutsche Telekom, France Telecom and America's Sprint Corp has been in talks with C&W - needing access to both the British and Asia markets. [09] Shell shareholders reject green voteA resolution at the Shell Transport and Trading Annual General Meeting calling for external monitoring of environmental and corporate policies of Shell was set for heavy defeat.Although the exact outcome of the vote was not immediately available, Shell chairman, John Jennings, announced that he had exercised authority to vote over 314 million shares against the resolution sponsored by the Pensions and Investment Research Consultants, an industrial pressure group. This was out of a total over 367 million shares represented at the AGM. He also announced the results of a separate proxy vote on the motion which had seen 29,600 shares voted against the motion out of a total 33,000 votes cast. [10] Mannesmann takes 15% stake in CegetelGerman engineering and technology group Mannesmann said it had signed contracts to take a 15% stake in Cegetel, the rival phone alliance set to challenge monopoly France Telecom.Other shareholders in the Cegetel group include British Telecom, which will hold 26%, Generale des Eaux, with 44%, and Southwestern Bell, with 15%. Cegetel already had one million mobile phone customers in France and planned to offer a full range of telecommunications services when the french market deregulates completely in 1998. Cegetel has access to an infrastructure covering all of France through Telecom Developement, a subsidiary of French railway SNCF. Mannesmann and Cie Generale des Eaux hold a joint participation in TD. The partners have begun preparing to obtain regulatory approval for the deal. SBC International is a unit of Southwestern Bell of the United States. [11] UK unemployment falls 0.2%, well beyond expectationUnemployment in Britain fell by a better than expected 59,400 to 1.65 million in April, its lowest level since August 1990.The unemployment rate fell to 5.9 percent in April from 6.1% in March in the 14th consecutive monthly decline. The jobless total was about 1.3 million down on its peak of near three million in 1992. But pressure for the Bank of England to raise official interest rates in order to keep the lid on inflation eased as earnings data released today showed that wage growth is slowing. Year-on-year growth in underlying average earnings stood at 4.5% in March, unchanged from revised February figures, the Office for National Statistics said. Growth in underlying average earnings in February was cut to 4.5% from the original 5.0%. Economists had forecast earnings growth of 5% in March. In recent months, bonus payments to star performers in the financial- services sector have pushed average earnings growth upward from around 4.25% in November. Economists said earnings growth should recede further to around 4.25% in coming months now that the the big bonus payments have been made. [12] Renault and Peugeot show gains despite sharp drop in French car salesThe number of vehicles sold in France dropped sharply to 131,300 from 187, 200 in the first quarter, but was offset by a rise in Western Europe to 293, 100 from 252,200 and an even stronger jump in other countries to 73,800 from 55,200.Car maker Renault said that first-quarter 1997 sales rose 3% to 47.20 billion francs ($8.2 billion) from a year earlier, helped by increased revenue from its auto division. Auto revenues rose 4% to 37.86 billion francs, as the upturn in the Western European market, not including France, was higher than expected, Renault said. The car sector also benefited from foreign exchange gains. Those gains offset a 26.5% decline in sales in the French car market during the first quarter, Renault said. The company's commercial vehicles division had revenues of 7.36 billion francs, down 2.5%, and finance division revenue also decreased, falling 5% to 1.99 billion francs from year-earlier levels. Finance revenue fell on the back of lower interest rates in France and Germany. Meanwhile, in a separate report PSA Peugeot Citroen said that its first- quarter 1997 sales rose 0.7% to 43.51 billion francs from a year earlier as auto sales increased. An increase in Citroen division sales offset a decline in Peugeot sales for an overall auto division rise of 1% to 41.3 billion francs. The company's mechanic and service division revenues fell to 2.2 billion francs from 2.3 billion francs a year earlier, due partly to a change in billing methods, the company said. [13] Imperial Tobacco posts 18% drop in first earnings since split from HansonImperial Tobacco, in its first set of financial results since it was spun off from Hanson last October, as part of the conglomerate's four-way break- up programme, said its business outlook for the rest of the year was in line with its expectations.Although the UK cigarette manufacturer's pretax profit in the six months to March 29 fell 18% to £143 million ($230.2 million), due to the cost of the debt it assumed from Hanson, its operating profits rose 5% to a record £183 million - in line with expectations. But looking longer term, chairman Derek Bonham said, 'Against the background of a gradually declining UK market, the development of our international business remains fundamental to our future strategy.' Imperial's share of the British cigarette market grew to 38.4% from 37.9%, but the market showed signs of decline over the period. Former Chancellor Kenneth Clarke's November budget pushed premium cigarette brand prices through £3.0 ($4.89) per pack, turning many smokers to take up cheaper brands. Imperial's Lambert & Butler brands in the low price sector continued to sell well, accounting for 12% of the British market. Britian's cigarette market has fallen some 3% since the Budget with Imperial selling just under 15 billion sticks since November. About 80 billion cigarettes are sold each year in Britain. The company, which owns the John Player Special and Embassy brands, and is one of Britain's largest cigarette manufacturers, last hit the headlines when it spent £185 million on the acquisition of the world's leading producer of handrolling tobacco papers, the Netherlands-based Rizla. 'The outlook for the group for the remainder of the current year remains in line with the board's expectations at the time of the demerger, but will benefit from an additional contribution arising from the acquisition of Rizla,' Bonham said. [14] Corporate and Economic BriefsFrance's provisional current account in February totalled 19.2 billion francs ($3.3 billion) on a seasonally-adjusted basis, the French finance ministry said. In unadjusted terms, the current account narrowed more sharply to 10.4 billion francs from a record 33.7 billion francs surplus in January. January's figures incorporated several changes in methodology, including a change in the status of trade with overseas territories to define it as foreign trade. On an adjusted basis, the January current account was in surplus by a provisional 21 billion francs.Germany's April wholesale prices rose 0.2% from March and 1.6% from the year-ago period. The year-on-year increase was in line with market forecasts, but the 0.2% rise on the month was higher than analysts' average expectations for unchanged prices from March. Compared with March, the statistics agency said Wednesday prices in April rose for frozen meat, up 6.5%; roasted coffee, up 3.5%; and fresh fruit, up 1.9%. Spain's consumer price index was unchanged in April from March, lowering the year-on-year rate to 1.7% from 2.2% in March, the national statistics institute said. The underlying inflation rate, a measure of consumer prices excluding fresh food and energy prices, increased 0.1% in April, lowering the year-on-year 'core' rate to 1.9%, down from 2.1% in March. Spanish inflation is among the highest in the 15-nation European Union, as is its unemployment which stood at 21.78% for the fourth quarter of 1996. The positive inflation outlook doesn't merely increase the likelihood of the Bank of Spain cutting its benchmark interest rate from 5.50% to at least 5.25% at its next regular repurchase agreement tender Friday, but could also lead to a similar move by the Bank of Italy, dealers said. French luxury goods and drinks maker LVMH Moet Hennessy Louis Vuitton said first-quarter sales rose 68% to 10.87 billion francs ($1.9 billion) from a year ago, citing strong growth in luxury products distribution. The company said that revenue from distribution of selective products almost tripled in the three-month period ended March 31 to 5.46 billion francs from 1.86 billion francs. The company increased its stake in U.S. duty-free distribution company DFS Group to 61.25% in 1996. Separately, in a legal filing, parent company Christian Dior said first-quarter sales rose 66% to 11.20 billion francs. Cie. Bancaire, a unit of Cie. Financiere Paribas, said first-quarter net, after payments to minority interests, rose 36% to 307 million francs ($53.4 million) from a year ago. Gross profit increased to 504 million francs from 283 million francs. Bancaire said earnings were affected by a massive effort at the end of last year to clean up its remaining exposure to bad real estate loans by making new provisions of 2.48 billion francs. The move brought the bank's UCB Locabail and Sinvim units out of the red. UCB contributed 57 million francs to group first-quarter earnings, compared with a loss of 51 million francs a year earlier, while Sinvim broke even, compared with a loss of 80 million francs a year ago. British supermarket group Safeway said that same store sales were up 3.7% in the first six weeks of the current year with prices down 0.9%. It said pre-tax profits before exceptionals were £430 million ($701.5 million), with an underlying figure of £421 million, up 7%, and paid out a total dividend of 14.10 pence per share, up 11%. German heating and cooling technology group Buderus said group pretax profit in the first half ended March 31 was 83 million Deutsche marks ($48.8 million), up 24% from a year earlier. Group sales in the period were 1.59 billion marks, up very slightly. 'Our goals for the current financial year remain higher sales and a further improved profit,' Buderus said. Buderus noted that most of its divisions showed an increase in sales in the first half, with the exception of steel products. In that division, sales dropped to 225 million marks from 272 million marks in the previous period. France's Michelin, one of the world's largest tyre and rubber companies, said its consolidated sales rose by 7.4% in the first three months of 1997 to 18.35 billion francs ($3.2 billion) from the same year-earlier period. The company's shares traded up on the news. From the European Business News (EBN) Server at http://www.ebn.co.uk/European Business News (EBN) Directory - Previous Article - Next Article |
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