They’re a thorough lot at the Competition and Markets Authority. They want to know what £1 plus 99p makes, with Poundland’s bid for 99p Stores, since around 80 of the cheaper stores are conveniently close to the others. Put the pair together, and Poundland might raise prices, although not, presumably, to £1.99.
To which Poundland’s response should be: other retailers are available, even though they may charge more for that essential Febreze Fabric Refresh Spray (375ml). Perhaps the CMA has to be seen to be doing something for the consumer, since when it comes to the rather more signficiant matter of the collapsing competition in telecoms, the regulators are strangely acquiescent.
Not long ago there were five main UK mobile operators. Then Orange and T-Mobile merged, with scarely a murmur from anyone, into the ridiculously-named EE.Now O2 is being bought by Three (O3?), while BT is gobbling EE (BEET?). Vodafone is the odd name out (so far). The good news for the bewildered consumer is that less choice means less homework, and the boss of Three says it intends to compete aggressively. BT, fresh from raising its costs with the deal to offer “free” football, has warned shareholders that mobile charges could be cut.
The bad news is that these two combinations mean less competition, or as the analysts at Jeffries put it: “Consolidation clearly enhances pricing prospects for UK mobile.” Indeed. The O3 combo is being looked at the European Commission, which promises many months of jolly tough negotiation followed by capitulation by the regulator.
BEET is set to be a domestic affair. The CMA has been gathering ammo from the likes of Vodafone and Talk Talk to help it decide what to do. The best guess is for more regulation of BT’s wholesale business, following the current belief across the political spectrum that regulation works better than competition. In practice, it spells yet more complexity in a big, important industry which is evolving rapidly. No wonder the CMA likes the look of adjudicating on a couple of simple retailers.
It’s gold, man, not iron
Jealous rivals to Goldman Sachs who like to use the bank’s “Conviction Buy/Sell” list as a fine contra-indicator have a splendid opportunity. Goldman is shockingly bearish on iron ore, seeing the price slumping to $33 a tonne by 2017. At that price all but the lowest-cost producers will have given up the unequal struggle, since the five biggest will be capable of delivering the entire world demand.
Rio Tinto, BHP, Vale, Anglo American and Fortescue Metals may still be standing, but they will be in pretty poor shape. Some may continue to pay dividends, says Goldman, but the market won’t be fooled if they’re not being earned, and they won’t support the share prices.
It’s certainly true that the producers have been purblind to the obvious signs of slowing demand from China. Investment cuts have been trivial, and “it’ll be interesting to see how the companies respond to protect their [credit] ratings without annoying equity investors”, as a note from Citigroup contends. It sees “the end of the iron age”, with all the gains from the super-cycle squandered in over-production. That would be really bad news for us shareholders – except that those “conviction sell” notes sometimes really do work as contra-indicators.
Just my interpretation
If your idea of an exciting opportunity is to work as a treasury regulatory interpretations manager, then you’re in luck. Headhunters Robert Walters say a “global investment bank” wants one, and is prepared to pay six figures. Of course you’ll need to know what LCR, NFSR and US 5G stand for, but the giveaway is in the job title.
Today’s rules need an ology in compliance to guide the boys who generate the fees, but “interpretations” can range from “What on earth does this mean?” to “How can I claim that what I’m going to do anyway complies?” Here, as a hypothetical example is Al Noor Hospitals, where a broker may have been left with stock from a placing this week. The stock is now xd, so where does the dividend cash go? See, a really exciting opportunity…
This is my FT column from Saturday