Online Newspapers Online 01-21-2014 | Scienc

Improved profitability at Nokia Solutions and Networks (NSN) due to cost cutting have helped cushion the company's declining handset business in recent quarters.

But with major projects in South Korea and Japan coming to an end, the NSN business, the bulk of Nokia's entire business after the handsets sale, is expected to report a 19 percent fall in fourth-quarter sales to 3.2 billion euros and a 17 percent fall for the whole of 2013 to 11.4 billion euros. Results are due on Thursday.

The decline for NSN would follow a 26 percent fall in third-quarter sales and come as scale has become increasingly crucial to competing against the industry leader for wireless networks, Ericsson, and China's Huawei, particularly due to high research and development costs.

NSN's chief Rajeev Suri, in an interview with Reuters in November, confirmed the company was now prioritizing revenue growth even if it meant a trade-off in profit.

Analysts said NSN must demonstrate that shift in coming quarters, and that markets will accept a dip in margins as long as they don't fall too far below 8 to 10 percent.

NSN's fourth-quarter adjusted operating margin is still likely to be high. The company forecast it will be around 12 percent, plus or minus 4 percentage points, compared with 8 percent in the third quarter.

That's higher than most rivals such as Ericsson, which reported an 8 percent operating margin last quarter as NSN's restructuring program launched in late 2011 cut a quarter of its workforce and took the business out of low-margin projects.

"It is possible that we won't be seeing such high margins this year, but I'd rather see them starting to grow again," said Inderes Equity Research analyst Mikael Rautanen.

Nordea Markets analyst Sami Sarkamies said Nokia's challenge will be to find new business to make up for a decline in sales in Asia, where a year ago it was busy building out high-speed wireless broadband networks. Asia, including Greater China, accounted for around 41 percent of NSN's 2.59 billion sales in the third quarter.

Wales said TPO had pulled off the difficult feat of creating an inspirational business that had solid commercial foundations.

"Its big vision is to generate massive sums of money for good causes," he said in a telephone interview on Monday. "But when I worked though the numbers and looked at the business model, it made a lot of sense to me."

TPO is a so-called mobile virtual network operator (MVNO), which means it relies on an existing operator's network, in this case EE, the British joint venture between France's Orange and Deutsche Telekom.

It launched a pay-as-you-go operation in November 2012 and followed in April 2013 with a contract offering unlimited voice, mobile and data for 14.99 pounds ($24.61) a month. Ten percent of revenue is directed to any good cause chosen by the customer and the company also pledges to pay 25 percent of its profits to charity.

Mark Epstein, chief executive and one of the company's founders, did not reveal customer numbers, but said there had been a rapid increase in take-up since it introduced its unlimited deal, from which hundreds of good causes were benefiting.

TPO, which is not yet profitable, does not spend huge sums on marketing, Epstein said, relying instead on word-of-mouth and promotion by the organizations it helps.

Wales, who launched online encyclopedia Wikipedia 13 years ago, said he would help TPO expand internationally, starting with the United States. He will be co-chairman of the company.

"We need to go global as quickly as possible," he said. "We will really push into other markets as soon as we can get deals done."

The United States and European Union both announced they were suspending some trade restrictions against the OPEC oil producer after the United Nations' nuclear watchdog confirmed that Iran had met its end of the November 24 agreement.

Tehran is expecting to be able to retrieve $4.2 billion in oil revenues frozen overseas and to resume trade in petrochemicals, gold and other precious metals.

The mutual concessions are scheduled to last six months, during which time six powers - the United States, Russia, China, France, Britain and Germany - aim to negotiate a final accord defining the scope of Iran's nuclear activity.

Western governments want to lay to rest their concerns that Iran could produce an atomic weapon and to end decades of hostility with Tehran that goes back to the Islamic revolution of 1979. Iran wants an end to painful U.S. and EU trade and financial sanctions that have severely damaged its economy.

The interim accord, struck after years of on-off diplomacy, marks the first time in a decade that Tehran has limited its nuclear operations, which it says have no military goals, and the first time the West has eased economic pressure on Iran.

"This is an important first step, but more work will be needed to fully address the international community's concerns regarding the exclusively peaceful nature of the Iranian nuclear program," the EU's foreign policy chief Catherine Ashton said.

"The iceberg of sanctions against Iran is melting," the head of Iran's Atomic Energy Organization, Ali Akbar Salehi, told Iranian state television.

The breakthrough is widely seen as a result in part of the election of Hassan Rouhani, a relative moderate, as Iran's president last year. Rouhani is expected to court global business this week at the World Economic Forum in Davos, although any future trade bonanza depends on the long-term success of nuclear diplomacy.

Israel, which has warned it might take military action, with or without U.S. backing, to prevent Iran developing nuclear arms, has called the deal a "historic mistake" that fails to ensure Tehran cannot build a bomb in secret.

Ashton, who coordinates diplomatic contacts with Iran on behalf of the six powers, said she expected talks on the final settlement to start in February.

The data was stolen by a computer contractor working for a company called the Korea Credit Bureau that produces credit scores.

The names, social security numbers and credit card details of 20 million South Koreans were copied by the IT worker.

The scale of the theft became apparent after the contractor at the centre of the breach was arrested.

Unprotected data Managers at the marketing firms which allegedly bought the data were also arrested.

Early reports suggest that the contractor got hold of the giant trove of data thanks to the access Korea Credit Bureau enjoys to databases run by three big South Korean credit card firms. The contractor stole the data by copying it to a USB stick.

Regulators are now looking into security measures at the three firms - KB Kookmin Card, Lotte Card, and NH Nonghyup Card - to ensure data stays safe. A task force has been set up to investigate the impact of the theft.

The three bosses of the credit card firms involved made a public apology for the breach.

In a statement the Financial Services Commission, Korea's national financial regulator, said: "The credit card firms will cover any financial losses caused to their customers due to the latest accident."

Another official at the FSC said the data was easy to steal because it was unencrypted and the credit card firms did not know it had been copied until investigators told them about the theft.

Cosmology theory predicts that galaxies are embedded in a cosmic web of "stuff", most of which is dark matter.

Astronomers obtained the first direct images of a part of this network, by exploiting the fact that a luminous object called a quasar can act as a natural "cosmic flashlight".

Details of the work appear in the journal Nature.

The quasar illuminates a nearby gas cloud measuring two million light-years across. And the glowing gas appears to trace out filaments of underlying dark matter.

The quasar, which lies 10 billion light-years away, shines light in just the right direction to reveal the cold gas cloud.

For some years, cosmologists have been running computer simulations of the structure of the universe to build the "standard model of cosmology".

They use the cosmic microwave background, corresponding to observations of the very earliest Universe that can be seen, and recorded by instruments such as the Planck space observatory, as a starting point.

Their calculations suggest that as the Universe grows and forms, matter becomes clustered in filaments and nodes under the force of gravity, like a giant cosmic web.

The new results from the 10-metre Keck telescope in Hawaii, are reported by scientists from the University of California, Santa Cruz and the Max Planck Institute for Astronomy in Heidelberg.

They are the first direct observations of cold gas decorating such cosmic web filaments. The cosmic web suggested by the standard model is mainly made up of mysterious "dark matter". Invisible in itself, dark matter still exerts gravitational forces on visible light and ordinary matter nearby.

Massive clumps of dark matter bend light that passes close by through a process called gravitational lensing, and this had allowed previous measurements of its distribution.

But it is difficult to use this method to see very distant dark matter, and cold ordinary matter remains tricky to detect as well.

The glowing hydrogen illuminated by the distant quasar in these new observations traces out an underlying filament of dark matter that it is attracted to it by gravity, according to the researchers' analysis.

"This is a new way to detect filaments. It seems that they have a very bright quasar in a rare geometry," Prof Alexandre Refregier of the ETH Zurich, who was not involved in the work, told BBC News.

Obama on Friday announced an overhaul of U.S. surveillance activities following criticism sparked by the disclosure of leaked documents exposing the wide reach of National Security Agency spy efforts.

He proposed an overhaul of the government's handling of bulk telephone "metadata" - lists of million of phone calls made by Americans that show which numbers were called and when.

Obama said the government will not hold the bulk telephone records. A presidential advisory panel had recommended that the data be controlled by a third party such as telephone companies, but Obama did not propose who should store the phone information in the future.

Signaling congressional opposition to the change, Democratic Senator Dianne Feinstein, who heads the intelligence panel, criticized the idea of moving the data out of government control.

"I think that's a very difficult thing because the whole purpose of this program is to provide instantaneous information to be able to disrupt any plot that may be taking place," Feinstein told the NBC program "Meet the Press."

"I think a lot of the privacy people (advocates) perhaps don't understand that we still occupy the role of the 'Great Satan,' new bombs are being devised, new terrorists are emerging, new groups - actually, a new level of viciousness. And I think we need to be prepared," she added.

Obama asked Attorney General Eric Holder and the intelligence community to report back to him by March 28 on how to preserve the necessary capabilities of the program without the government holding the metadata.

The usefulness of keeping the metadata records was questioned by a presidential review panel, which found that while the program had produced some leads for counterterrorism investigators, such data had not been decisive in a single case.

Representative Mike Rogers, the Republican chairman of the House of Representatives Intelligence Committee, faulted Obama for creating uncertainty surrounding the program.

"Just in my conversations over the weekend with intelligence officials, this new level of uncertainty is already having a bit of an impact on our ability to protect Americans by finding terrorists who are trying to reach into the United States," Rogers told CNN's "State of the Union."

The chance that the world's second-largest economy may decelerate in coming months was underscored on Monday by data that showed growth in investment and factory output flagged in the final months of last year.

Waning momentum capped China's annual economic growth at a six-month low of 7.7 percent in the October-December quarter, a slowdown some analysts say may deepen this year as China endures the short-term pain of revamping its growth model for the long-term good.

Full-year growth in 2013 was 7.7 percent, steady from 2012 and just slightly above market expectations for a 7.6 percent expansion, which would have been the slowest since 1999.

"It's like a Chinese medicine," said Lu Zhengwei, chief economist at Industrial Bank in Shanghai.

"If you don't take it, you may have problems in future. But if you take it now, you cannot expect to regain your youth tomorrow."

After 30 years of sizzling double-digit economic growth that lifted many millions of Chinese out of poverty but also devastated the environment, China wants to change tack by embracing sustainable and higher-quality development instead.

That means reducing government intervention to allow financial markets to have a bigger say in allocating resources, and promoting domestic consumption at the expense of investment and exports.

Monday's data from the National Bureau of Statistics showed China's 56.9 trillion yuan ($9.4 trillion) economy is still very much dependent on investment for growth.

Capital formation accounted for 54 percent of China's economic growth last year, exceeding the 50 percent share taken up by consumption. Net exports, on the other hand, detracted 4.4 percent from overall growth.

"I don't see any evidence of a rebalancing last year," said Tim Condon, an economist at ING in Singapore. Yet there are signs Beijing wants to rein in investment.

For the whole of 2013, China's fixed-asset investment climbed 19.6 percent, the smallest increase in at least 10 years and a tick below forecasts for a 19.8 percent rise.

Ambitious investment by local Chinese governments that have racked up some $3 trillion worth of debt has been at the forefront of China's investment drive in recent years, a trend that must be checked, said Ma Jiantang, head of China's statistics bureau.

"In 2014, I believe reforms will continue to be a key driving forces for economic growth," Ma said on Monday.

DOING WELL

The sale by KKR & Co and Affinity Equity Partners will be Asia's biggest ever for private equity, excluding flotations, and rewards them with returns of more than five times their investment.

However AB InBev can claim with Monday's deal to be paying a reasonable price for a business that has grown in value in the five years since it was sold for $1.8 billion. That sale was one of the aggressive divestments forced on InBev after its $52 billion purchase of U.S. brewer Anheuser-Busch in 2008.

AB InBev shares rose 1.0 percent by 1050 GMT on Monday, making them the strongest performers in a STOXX 600 European food and beverage index, which was up 0.3 percent.

Andrew Holland, analyst at Societe Generale, said the price was pretty fair considering OB's improved profitability.

"AB InBev is looking for areas of growth faster than in its existing business," he said. Referring to the brewer's two largest markets, he added: "I'm cautious on the U.S. and there are question marks over underlying growth in Brazil beyond the World Cup and weather bounce expected in 2014."

OB, with top-selling lager Cass, has become Korea's largest brewer with a 60 percent market share. It raised its core profit (EBITDA) to some $500 million last year - 2.3 times greater than when KKR and Affinity acquired it.

Korea is a relatively mature beer market, with 40 liters drunk per capita per year, on a par with China. Growth was 2 percent per year from 2009 to 2012, and seen at a little over an annual 1 percent for the subsequent 10 years.

The overall price of AB InBev's deal - excluding a $320 million cash payment it expects to receive - is some 11 times OB's EBITDA. That's well below the 16 times Heineken paid in 2012 to take control of Asia Pacific Breweries, which is active in faster-growing southeast Asia.

The more modest multiple may also reflect the fact that KKR and Affinity have probably already made many of the sort of cost cuts that AB InBev typically seeks from its acquisitions.

Analysts said AB was likely to find further savings from cheaper procurement of raw materials due to its global scale and by pushing its higher-margin premium brands, such as Budweiser and Stella Artois via OB in Korea - as well as selling OB's beers outside Korea.

ASIAN ATTRACTION

One of their favorites: Verifone Systems Inc, a $3.2 billion market cap company that is one of two major global manufacturers of point-of-sale terminals and mobile payments systems and could profit from any major upgrades of payment technology. Analysts at JPMorgan Chase and Jefferies & Co upgraded their outlook for the company in the last 10 days, helping send its shares price up about 25 percent since the Target breach was first reported on December 18.

Yet for its shares to continue to rally, Verifone must prove to analysts and portfolio managers it has taken steps to right its own ship after several years of choppy performance.

That question mark is a product of several years of poor acquisitions and a history of missing earnings estimates that left the company's shares down more than 20 percent for the year just before the Target breach become public - in a bullish year for stocks. It hangs over the company as a new wave of credit card technology looks poised to finally make inroads in the U.S. after being the standard in Europe for years.

"Verifone has a tremendous and recently unappreciated position in the industry, yet it's kind of a messy place. The new management team looks great, but this is like waiting for Godot," said Jeffrey Bronchick, whose $56.3 million Cove Street Small Cap Value fund has one of the best performances in its category over the last three years, according to Morningstar data. In the Samuel Beckett play, two characters wait endlessly for Godot, who never shows up.

Verifone declined to make executives available for this article.

Bronchick said that he sold his position in the company during its recent rally in large part because, at approximately $29 a share, its stock price looks expensive. The stock trades at a forward price-to-earnings ratio of 19.5, which is well above the approximately 16 times multiple of the broad market.

"The stock is reflecting a seamless next two years and I think there's little likelihood of it," he said.

TECHNOLOGY UPGRADE

Deutsche Telekom this week transferred ownership of its 67 percent stake in T-Mobile to a Dutch holding company from a German holding company, fuelling speculation it may be looking to sell the U.S. business.

Sprint and T-Mobile US have long wanted to combine to create a stronger rival against the top two U.S. mobile carriers, Verizon and AT&T, while Softbank CEO Masayoshi Son wants to build the world's biggest mobile Internet company.

Softbank has assurances from banks that financing is available but an agreement could still take months to reach, Bloomberg reported.

Matters to be resolved include how much cash and stock SoftBank will pay for Deutsche Telekom's stake in T-Mobile, and how Sprint and T-Mobile will be integrated, Bloomberg further reported.

Sources had told Reuters in December that Softbank was in talks to acquire T-Mobile US and was discussing funding for a deal.

Berlusconi was thrown out of parliament in 2013 after a tax fraud conviction.

But he still heads the opposition Forza Italia party and held lengthy talks with Democratic Party (PD) leader Matteo Renzi late on Saturday.

Under their agreement, he will back electoral and constitutional proposals aimed at making Italy more governable.

The current electoral system has left Italy with a series of shaky coalitions.

Last year's general election left no party strong enough to govern alone, until a broad coalition emerged, headed by Enrico Letta of the PD.

Berlusconi, 77, was initially part of the government but later pulled out. Several key former allies abandoned him to form the New Centre Right party while he became a more marginalised figure.

But he remained head of Italy's biggest opposition faction, Forza Italia.

Mr Renzi's talks with the former centre-right prime minister have divided the coalition, and the PD in particular, whose supporters despise him, BBC Rome correspondent Alan Johnston reports. His car was hit with an egg and he was booed as he arrived at PD headquarters.

After the talks Berlusconi said the deal would "consolidate the biggest parties and simplify the political system".

Mr Renzi said the two leaders had backed a law that "favours governability and a bi-polar system, and eliminates the blackmail power of the smallest parties".

Silvio Berlusconi is keen to make a political comeback despite his fraud conviction and a separate conviction for paying an underage prostitute for sex. He is appealing against a seven-year jail term.

It is the fourth case brought against Mursi since he was ousted by the army last year, after a year in power, following mass protests against his rule.

But it also points to the growing pressure faced by the secular-minded activists who helped to topple Hosni Mubarak in 2011, and have criticized both Mursi's Muslim Brotherhood when it was in power and the new military-backed authorities.

The non-Islamists charged in the case include former members of parliament Amr Hamzawy and Mostafa El Naggar, as well as Alaa Abdel Fattah, an activist blogger detained since November and already facing trial on charges of protesting without permission.

The charge of insulting the judiciary carries a jail term of up to three years.

Mursi has already been charged with inciting violence and conspiring with foreign militants against Egypt.

Egypt's army-backed interim government has waged a determined campaign of suppression against the Brotherhood, which it has labeled a terrorist organization. The security forces killed hundreds of its supporters in the weeks after Mursi was overthrown, and arrested thousands more.

The government accuses the Brotherhood of turning to violence. The Brotherhood, once Egypt's best-organized political and religious movement, which won five consecutive elections, denies any links to violence and accuses the army of staging a coup.

Mursi is next due in court on January 28, when he goes on trial on charges related to a mass jailbreak in 2011.

The interim government is pushing ahead with a political transition plan that should lead to presidential and parliamentary elections this year, with army chief General Abdel Fattah al-Sisi seen as a likely candidate.

Egyptians passed a new constitution in a referendum last week with a 98.1 percent "yes" vote, according to official results. The vote was boycotted by the Brotherhood.