Latest / Bloomberg Intelligence / How Avis-Waymo and Hertz-Apple Partnerships Affect Driverless Future

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How Avis-Waymo and Hertz-Apple Partnerships Affect Driverless Future · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
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  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. There
• 0:32
  Speaker 1: is a slew of stories PIM about rental car companies
• 0:35
  Speaker 1: teaming up with big tele technology companies to manage their
• 0:40
  Speaker 1: driver lists car fleets. And I thought this was fascinating.
• 0:44
  Speaker 1: So let's bring in chrys Chrysler minivans. Maybe they'll even
• 0:48
  Speaker 1: put another badge on at Alphabet and their way Mo
• 0:51
  Speaker 1: autonomous driving division. Yeah, I want to I want to
• 0:54
  Speaker 1: get more context in this because it seems like a
• 0:55
  Speaker 1: pretty big significant development. I want to bring in Allen Baum,
• 0:59
  Speaker 1: principal at UM and associates, as well as our own
• 1:01
  Speaker 1: a non street Astavan senior semiconductor and hardware analysts at
• 1:06
  Speaker 1: Bloomberg Intelligence, and I want to start with you UM. Yesterday,
• 1:10
  Speaker 1: what was so significant that two agreements were reported? We
• 1:14
  Speaker 1: had Avis coming up with something with Weymo to possibly
• 1:19
  Speaker 1: manage their driver list a fleet, and then Apple and
• 1:22
  Speaker 1: Hurts appear to be discussing some kind of similar partnership.
• 1:24
  Speaker 1: Why now and what what really are these partnerships? Look,
• 1:28
  Speaker 1: at the end of the day, these are complicated electro
• 1:30
  Speaker 1: mechanical machines. I think that technology companies have figured out
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  Speaker 1: that they need to be um partnering with somebody who
• 1:36
  Speaker 1: has substantial experience in the vehicle department. So as much
• 1:41
  Speaker 1: as driver list technical that would be a good thing.
• 1:44
  Speaker 1: That would be a good thing because they take space.
• 1:46
  Speaker 1: You need to do some maintenance maintenance, whether it's an
• 1:50
  Speaker 1: electric vehicle fleet or a fuel injection vehicle. You need
• 1:54
  Speaker 1: regular checkups on everything from tires to fluid levels to
• 1:58
  Speaker 1: batteries for example. And you just can't automate the whole thing,
• 2:02
  Speaker 1: just like you do with the server farm or a
• 2:06
  Speaker 1: phone so much to the annoyance of people in the
• 2:09
  Speaker 1: technology industry significantly, so you can't. You can't put it
• 2:12
  Speaker 1: in the cloud and forget about it. So so this
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  Speaker 1: is that part of that. This is a messy part
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  Speaker 1: of the hardware that needs to be taken care of. Well, Ellen,
• 2:21
  Speaker 1: I want to bring you in here are Hurts and
• 2:23
  Speaker 1: Eva's equipped to really manage a fleet like this. This
• 2:27
  Speaker 1: isn't exactly their business. Well, they're not going to be
• 2:31
  Speaker 1: managing the technology. They actually made pretty clear that the
• 2:35
  Speaker 1: WEYMO will be responsible for making sure about the hardware
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  Speaker 1: and the software of the autonomous vehicle uh is functional.
• 2:44
  Speaker 1: But it's also about distribution. Uh you know the idea.
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  Speaker 1: There's been a lot of surveys about how people view this,
• 2:53
  Speaker 1: how the general public views it, and it's generally pretty negative.
• 2:56
  Speaker 1: And the obvious reason is people don't know what they
• 2:59
  Speaker 1: don't know. Um and so you know, this sounds pretty
• 3:02
  Speaker 1: creepy that your car driving your driving itself, and uh
• 3:06
  Speaker 1: so that there's a concern about that. With distribution, as
• 3:10
  Speaker 1: people start to to experience it, then perhaps their their
• 3:14
  Speaker 1: views will become more positive. And so that's what this
• 3:17
  Speaker 1: is about. And this is also a very good I
• 3:21
  Speaker 1: think for the electric vehicle industry because what it it, uh,
• 3:24
  Speaker 1: it's it's an example of is when you talk about
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  Speaker 1: a HURTS and an AVIS being involved, the cost of
• 3:32
  Speaker 1: the service, of of providing the services critical and so
• 3:37
  Speaker 1: to the extent that electric vehicles are going to be
• 3:39
  Speaker 1: cheaper to run, I'm not really talking about cheaper to buy,
• 3:43
  Speaker 1: but cheaper to run than that's critical for these these opportunities.
• 3:49
  Speaker 1: And so we see the players that are good at this,
• 3:53
  Speaker 1: that are good at running fleets getting more involved. So
• 3:57
  Speaker 1: is this as much a recognition that the business model
• 4:00
  Speaker 1: of rental car companies such as Budget and Avis, Budget
• 4:06
  Speaker 1: and Hurts Global, that their business model aligns financially with
• 4:13
  Speaker 1: the ownership and maintenance portion of these vehicles future Because
• 4:19
  Speaker 1: it's about scale, as you said on them, absolutely see
• 4:21
  Speaker 1: economic scale and technology is sort of the foundation of
• 4:26
  Speaker 1: which large technology shifts occur. Right, So to Mr Brown's point,
• 4:31
  Speaker 1: it's a great distribution channel. They know how to run
• 4:34
  Speaker 1: and operate cars, and they know how to run and
• 4:35
  Speaker 1: operate cars cheaply so and appreciate the value of those
• 4:39
  Speaker 1: cars the benefit of their shareholders exactly. And this allows
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  Speaker 1: technology to proliferate through their fleet better, faster, more effectively.
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  Speaker 1: That's point number one. The point number two is if
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  Speaker 1: you look at drivertive technology enhancements, one of the things
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  Speaker 1: that we have written about extensively is this notion of
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  Speaker 1: collecting data from UH many many, many number of points.
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  Speaker 1: This is one industry which needs a large amount of
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  Speaker 1: vehicles flying on the road to gather information. Who better
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  Speaker 1: do it from rather than than doing it one by
• 5:13
  Speaker 1: one by one on an ownership basis renting of cars. Well,
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  Speaker 1: and this raises a question. This raises my next question, Alan,
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  Speaker 1: I want to direct this at you. The significance of
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  Speaker 1: this is it that we're getting closer to the reality
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  Speaker 1: of a self driving fleet that will actually get implemented
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  Speaker 1: in urban areas or elsewhere. I mean, are we really
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  Speaker 1: see are we at the precipice of a sort of
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  Speaker 1: see change in transportation. I'm a little uh cautious on that. Uh,
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  Speaker 1: you know, will this work in Manhattan? Will this work
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  Speaker 1: in San Francisco? Yes? Um, but of course it has
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  Speaker 1: to compete with the existing system well well, but beyond
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  Speaker 1: beyond but sorry, Alan, but beyond just will it work?
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  Speaker 1: I mean, is it going to be experimented with at
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  Speaker 1: this point? Is that the Is that the significance or not?
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  Speaker 1: You want to take that? Yeah, I think that. I
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  Speaker 1: don't know if it's Manhattan or San Francisco urban areas
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  Speaker 1: as much as it's going to I think start with
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  Speaker 1: UM large fleets of trucks. It's going to start with closed, compartmentalized,
• 6:17
  Speaker 1: UM sort of gated communities if you may, whether it's
• 6:20
  Speaker 1: a campus network, whether it's universities. One of the things
• 6:23
  Speaker 1: that we've said is university campuses may be ideal for
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  Speaker 1: an experimentation with that, and particularly on the West Coast,
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  Speaker 1: large urban or suburban corporate campuses would be ideal for
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  Speaker 1: such a fleet where, um, you could experiment with the vehicles,
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  Speaker 1: you could experiment with buses, you could experiment with cars.
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  Speaker 1: But at the end of the day, you also need
• 6:46
  Speaker 1: urban data. You also need data from different parts that
• 6:49
  Speaker 1: you need rural data. You need data from all of
• 6:51
  Speaker 1: these different parts. And I think that I'm not so sure.
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  Speaker 1: I agree with with Mr round in that I don't
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  Speaker 1: know if it's to come sooner or later. But I
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  Speaker 1: think that this is we're going to try multiple different things.
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  Speaker 1: I think the experimentation with the rental car companies is
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  Speaker 1: a great idea. I think that we might start with
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  Speaker 1: the universities, corporate campuses, etcetera. We have to experiment in
• 7:16
  Speaker 1: order to collect this data to make this feasible. Alan
• 7:19
  Speaker 1: bound you have a response. The development process is growing
• 7:24
  Speaker 1: at at an amazing rate. I mean literally, it's two
• 7:27
  Speaker 1: or three items a week, um and yesterday two items
• 7:32
  Speaker 1: in one day where there are all these collections of
• 7:36
  Speaker 1: major players, both in the technology and the auto space
• 7:40
  Speaker 1: and now in distribution. Um, so we're seeing dramatic opportunities. Obviously,
• 7:46
  Speaker 1: not everything is gonna work, and that's what the system
• 7:49
  Speaker 1: is finding. I just saw a video of Tesla's new
• 7:53
  Speaker 1: autopilot where it was for about a twenty minute space
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  Speaker 1: of where it did and did not work. But of
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  Speaker 1: course in restless case, they're getting one a non to
• 8:02
  Speaker 1: saying that data. They get the data, whether you're using
• 8:05
  Speaker 1: autopilot or not, and that data is critical to the
• 8:09
  Speaker 1: development of the technology. And of course we've also got
• 8:13
  Speaker 1: the regulatory issue, which is actually being discussed in Washington today,
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  Speaker 1: where the auto companies and the technology companies are saying,
• 8:21
  Speaker 1: we really don't want fifty states having different different policies
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  Speaker 1: about this, Thanks very much. We gotta leave it there,
• 8:29
  Speaker 1: we gotta run Alan bound Principal Bauman associates on trin
• 8:33
  Speaker 1: of US and Bloomberg Intelligence. Just type b I go
• 8:36
  Speaker 1: on the Bloomberg for more. Well, I am a little
• 8:50
  Speaker 1: bit perhaps confused about one issue in the exchange traded
• 8:54
  Speaker 1: fund universe that only one all right, fairy fam but
• 9:01
  Speaker 1: this has been the fastest growing aspect of the asset
• 9:04
  Speaker 1: management industry, and it is now an increasingly actively managed
• 9:09
  Speaker 1: industry because you have the passive e t F which
• 9:12
  Speaker 1: account for the majority of the ass under management, but
• 9:13
  Speaker 1: there is the fastest growing component that is smart beta.
• 9:16
  Speaker 1: To understand how actively managed e t f s fit
• 9:19
  Speaker 1: into this this universe it's known for being passive. I
• 9:22
  Speaker 1: want to bring in Tom Hoops, executive vice president, a
• 9:25
  Speaker 1: head of business development. Uh like Mason, really glad to
• 9:29
  Speaker 1: have you here, Thank you so much, thanks for having so.
• 9:32
  Speaker 1: Can you explain where actively managed e t f s
• 9:35
  Speaker 1: fit in to a universe that has gained popularity for
• 9:38
  Speaker 1: being passive and cheap. Yeah. Sure. I think it starts
• 9:42
  Speaker 1: with thinking about the e t F as a vehicle
• 9:45
  Speaker 1: as opposed to an investment strategy and separating that. I
• 9:48
  Speaker 1: think the industry and the media often we get it wrong.
• 9:51
  Speaker 1: We think about e t f s and market cap
• 9:54
  Speaker 1: passive as being synonymous and true, most of the volume
• 9:57
  Speaker 1: that's been in e t f s today has been
• 10:00
  Speaker 1: in market cap passive. But ultimately the e t F
• 10:03
  Speaker 1: is just a delivery vehicle for an investment strategy. Yes,
• 10:07
  Speaker 1: although part of the beauty of the e t F
• 10:11
  Speaker 1: is its transparency, which doesn't always work with an actively
• 10:14
  Speaker 1: managed fund, particularly in less liquid areas right um, as
• 10:18
  Speaker 1: well as it's ease of transaction. So it's sort of
• 10:21
  Speaker 1: uh is supposed to be a proxy for a broad
• 10:23
  Speaker 1: market that you can just easily access, right it doesn't
• 10:26
  Speaker 1: have to be a proxy for a broad market. I
• 10:27
  Speaker 1: do think that the ease of access is important. I
• 10:30
  Speaker 1: think transparency has been an issue and that is is
• 10:33
  Speaker 1: a potentially a roadblock to broader adoption of delivering active
• 10:37
  Speaker 1: strategies UM in an e t F. But it also
• 10:40
  Speaker 1: has lower overall operating expenses and gives clients a better
• 10:43
  Speaker 1: tax outcome. So as a rapper, it's it's in many
• 10:46
  Speaker 1: ways a better mouse trap than the forty Act mutual fund.
• 10:49
  Speaker 1: And so you know, for clients and advisors and gatekeepers
• 10:52
  Speaker 1: that want to access active strategies, which they still do
• 10:56
  Speaker 1: in large numbers, having it in a more efficient, lower
• 11:00
  Speaker 1: US tax friendly rapper we think just makes sense. Does
• 11:03
  Speaker 1: this also have to do with the way that the
• 11:05
  Speaker 1: financial industry has evolved in the sense that if you
• 11:07
  Speaker 1: are a great money manager, you can go out and
• 11:10
  Speaker 1: create your own mutual fund and then people will want
• 11:13
  Speaker 1: to invest based on your ability to produce the returns
• 11:16
  Speaker 1: or the risk profile that they want. On the other hand,
• 11:19
  Speaker 1: with an exchange traded fund, it seems to be the
• 11:22
  Speaker 1: vehicle that is run by the larger financial institution based
• 11:28
  Speaker 1: upon a desire obviously to market the investment, but also
• 11:33
  Speaker 1: to take advantage of whatever the strengths are of your
• 11:36
  Speaker 1: financial institution. Yes, so so him. Our Our strategy, like Mason,
• 11:40
  Speaker 1: has been to increase client choice in both investment strategies
• 11:44
  Speaker 1: and in products and vehicles. And so getting the right
• 11:47
  Speaker 1: investment strategy in front of a client or in a
• 11:50
  Speaker 1: client's portfolio is most important if they want to access
• 11:53
  Speaker 1: that strategy through a mutual fund, through separately managed account,
• 11:57
  Speaker 1: through an et F, through collective fund, through use it's fund,
• 11:59
  Speaker 1: its R That's that's all fine. We want to be
• 12:01
  Speaker 1: able to offer them that choice. Which asset classes are
• 12:05
  Speaker 1: most uh conducive to active management management in ETF wrapper?
• 12:11
  Speaker 1: I mean, what are you looking at to sort of
• 12:13
  Speaker 1: expanding sure, sure so so So Back to the transparency
• 12:16
  Speaker 1: issue is, as you know, the E t F vehicle
• 12:18
  Speaker 1: UM as it stands today does require UM daily transparency. UM.
• 12:23
  Speaker 1: We're certainly fine with daily transparency with clients or the
• 12:26
  Speaker 1: second largest SMA provider UM in the in the US,
• 12:30
  Speaker 1: and that means we provide, of course a daily transparency
• 12:32
  Speaker 1: to our clients, but with an e t F, it's
• 12:35
  Speaker 1: daily transparency to the market and market makers, and that
• 12:38
  Speaker 1: can of time put your IP at risk for front
• 12:41
  Speaker 1: running UM and and other things that could be detrimental
• 12:43
  Speaker 1: to the client. That is less of an issue in
• 12:46
  Speaker 1: fixed income, and that's why you've seen to date the
• 12:49
  Speaker 1: largest active ETFs have been in the fixed income space.
• 12:53
  Speaker 1: It's harder to front run and get ahead of of
• 12:55
  Speaker 1: of fixed income securities and fixed income portfolios. On the
• 12:59
  Speaker 1: equity side, though, that is where I think the market
• 13:02
  Speaker 1: is looking for some type of technology or solution to
• 13:05
  Speaker 1: deal with the transparency issue so that we can deliver
• 13:08
  Speaker 1: actively manage equity strategies UM in the advantages of the
• 13:12
  Speaker 1: E t F vehicle. Let's talk, if you can, about
• 13:16
  Speaker 1: some of the results from a recent survey. This is
• 13:19
  Speaker 1: the fifth annual survey. I believe that you've uh that
• 13:23
  Speaker 1: your reference and it has to do with the attitudes
• 13:26
  Speaker 1: of investors, and I thought it was very interesting that
• 13:28
  Speaker 1: your your expectations for certain levels of return are almost
• 13:34
  Speaker 1: determined by your age and what you do. Yeah, I
• 13:39
  Speaker 1: think I think them. There were a lot of interesting
• 13:42
  Speaker 1: results or eye opening results when it came to investor
• 13:45
  Speaker 1: expectations versus versus reality, and it did vary some by generation,
• 13:51
  Speaker 1: varied some by whether one was was employed currently or retired.
• 13:55
  Speaker 1: At the end of the day, though there is still
• 13:57
  Speaker 1: a pretty sizeable gap between investors think they're gonna earn,
• 14:02
  Speaker 1: particularly in in income oriented investments, versus where we think
• 14:06
  Speaker 1: the world is now and where it will be going forward. Well,
• 14:08
  Speaker 1: it just said that the numbers fully retired. If you're
• 14:11
  Speaker 1: fully retired, you're looking at overall average rate of return
• 14:15
  Speaker 1: of six point two percent, which is a lot more
• 14:18
  Speaker 1: realistic than the nine percent that people who are employed
• 14:23
  Speaker 1: are sting. They're more uh, they're okay with investing in
• 14:27
  Speaker 1: safer assets that they can get a more predictable returns.
• 14:30
  Speaker 1: They might just be also de risking, right, or maybe
• 14:32
  Speaker 1: they just have everything they need. I'm sure the more
• 14:35
  Speaker 1: realistic they're older too. We we have seen again it's
• 14:38
  Speaker 1: persisted now for a few years in the survey, a
• 14:41
  Speaker 1: large allocation to cash um across all generations in the range. Wow,
• 14:49
  Speaker 1: all right, that's something to watch and thank you very
• 14:50
  Speaker 1: much for being with us. Tom Hoops is executive vice
• 14:53
  Speaker 1: president and head of business development leg Mason based in Baltimore. Well,
• 15:10
  Speaker 1: we've all been adding up our cable and our mobile
• 15:13
  Speaker 1: phone bills here in the studio, and the number is
• 15:15
  Speaker 1: not pleasant. Here to help us understand it and the
• 15:18
  Speaker 1: possible combination between Sprint and Charter and Comcast as Bloomberg
• 15:22
  Speaker 1: Intelligence his own Josh Yatsko wits he is a media
• 15:25
  Speaker 1: and cable analyst, and Matthew Cantererman he is a telecom
• 15:29
  Speaker 1: services as well as equipment analysts, and they join us
• 15:32
  Speaker 1: in our studios. Gentlemen, thanks for being here. I'm not
• 15:35
  Speaker 1: gonna make you reveal your cable bills or you know
• 15:38
  Speaker 1: how much it costs for your mobile service, but we
• 15:39
  Speaker 1: were informally talking and realizing, my goodness, we're supporting you know,
• 15:43
  Speaker 1: at least three behemoth organizations. I want you to talk
• 15:47
  Speaker 1: about some of them, Sprint, Comcast and Charter. H Matthew,
• 15:51
  Speaker 1: maybe you want to start off by describing what do
• 15:54
  Speaker 1: you think is going on here? Sure says say Sprint
• 15:57
  Speaker 1: for a while as underinvested in its network, they've been
• 15:59
  Speaker 1: concentrated aim by very high leverage, low free cash flow,
• 16:02
  Speaker 1: so they're looking for ways to finance network investments UM
• 16:05
  Speaker 1: to catch up to their rivals A, T and T,
• 16:07
  Speaker 1: Verizon and Tea Mobile has been the most aggressive recently.
• 16:10
  Speaker 1: UM an equity investment from the cable companies who Josh
• 16:14
  Speaker 1: can speak to about their desire to get into wireless
• 16:16
  Speaker 1: and offer quadruple play bundles to reduce their turn You know,
• 16:20
  Speaker 1: it suits all parties. It helps Sprint get cash to
• 16:22
  Speaker 1: accelerate their capex, and it helps the cable companies, you know,
• 16:25
  Speaker 1: get good, cheap access to the wireless airways that they
• 16:28
  Speaker 1: need to to lease to to offer those services. So, Josh,
• 16:32
  Speaker 1: let's bring you in how how beneficial is it for
• 16:35
  Speaker 1: Comcast and Charter Because theoretically, as Matt saying, you know,
• 16:39
  Speaker 1: it does sound like there is some kind of benefit.
• 16:42
  Speaker 1: And yet when you look at the share prices of
• 16:43
  Speaker 1: both Comcast and Charter both down. Sprint though, is up
• 16:46
  Speaker 1: because investors are loving the idea of a possible bailout
• 16:50
  Speaker 1: or extra cash. Yeah, so Charter and Comcast have actually
• 16:54
  Speaker 1: been having wireless ambitions for a while. Right now they
• 16:57
  Speaker 1: have a deal with Verizon and MV and O deal
• 16:59
  Speaker 1: where they can utilize the services. MBNO, you've gotta help
• 17:03
  Speaker 1: us m vyn O. It's basically a way for them
• 17:06
  Speaker 1: to utilize Verizon services without owning the network. So they're
• 17:09
  Speaker 1: using it as a wholesale agreement. UM. So with Sprint,
• 17:13
  Speaker 1: they could look into multiple options, one of which is
• 17:15
  Speaker 1: doing another mv and O type agreement with Sprint, maybe
• 17:18
  Speaker 1: getting better deal terms, or actually going out and buying Sprint.
• 17:22
  Speaker 1: We tend to think that an MBNO is more likely
• 17:25
  Speaker 1: that Comcast and Trotter are going at this little slow
• 17:27
  Speaker 1: We want to test the waters and also maybe help Sprint,
• 17:31
  Speaker 1: as Matt said, Jack some cash and see where the
• 17:34
  Speaker 1: network goes. Just real quick, how much money is at stake?
• 17:37
  Speaker 1: I mean these MVNO is, these these agreements to use
• 17:40
  Speaker 1: the wireless network that Sprint has. How much would a
• 17:44
  Speaker 1: Comcast or try to pay for that? The deal terms
• 17:47
  Speaker 1: are not disclosed. I don't know if um Matt hasn't anything.
• 17:50
  Speaker 1: But you saw what Comcast is charging its customers, and
• 17:53
  Speaker 1: it's utils utilizing its WiFi network which has sixteen million
• 17:56
  Speaker 1: hot spots, so they can offload a lot of that
• 17:59
  Speaker 1: data traffic onto the why find network. We do still
• 18:01
  Speaker 1: overall costs from the NBN oh, and actually get a
• 18:03
  Speaker 1: positive return on that. Matthew, I want to know about Sprint.
• 18:07
  Speaker 1: I mean, do they need this deal? I mean they
• 18:09
  Speaker 1: need the cash, don't they. It seems like Massa needs
• 18:12
  Speaker 1: a deal because he's been trying to sell Sprint for
• 18:14
  Speaker 1: a while now. He's talked to Team Mobile, Joy, to Telecom,
• 18:17
  Speaker 1: the cable companies, He's talking to everybody. He talked to
• 18:19
  Speaker 1: Charlie Ergan shopping it around. He's shopping it around. Is
• 18:22
  Speaker 1: that the is that? Does that make sense? I mean,
• 18:24
  Speaker 1: is that you know it's sort of you're shopping something
• 18:27
  Speaker 1: around that must make it difficult to gain any kind
• 18:30
  Speaker 1: of leverage in any kind of It does. But but
• 18:33
  Speaker 1: you know, he put a lot of money into it
• 18:35
  Speaker 1: and it didn't work out the way he wanted. You know,
• 18:37
  Speaker 1: Sprint's been unable to leverage the vast spectrum massets they
• 18:40
  Speaker 1: have for all the reasons I said before. Um, you know,
• 18:43
  Speaker 1: that's the value he saw and they've been unable to
• 18:45
  Speaker 1: monetize that for him. So he's looking at ways to
• 18:48
  Speaker 1: to monetize his investment that he made in the company
• 18:51
  Speaker 1: a few years ago. Being the head of soft Bank
• 18:53
  Speaker 1: which on Sprint right exactly, sorry, and so UM, you
• 18:56
  Speaker 1: know what what he would you know, by shopping around.
• 18:59
  Speaker 1: He's trying to find the best deal. And you know,
• 19:01
  Speaker 1: aside from just getting cash, I think one of the
• 19:03
  Speaker 1: key assets the cable companies have is the deep fiber
• 19:07
  Speaker 1: and collaxial cable networks and in the neighborhoods if you
• 19:09
  Speaker 1: think about, you know, particularly in the suburbs and the
• 19:12
  Speaker 1: in the rural areas where they are the only provider
• 19:15
  Speaker 1: or one of two providers of those services deep into
• 19:17
  Speaker 1: the neighborhoods. Um, you know, Sprint can just stick up
• 19:20
  Speaker 1: small cells on top of those and you know, very cheaply. UM,
• 19:24
  Speaker 1: you know, expand the quality and the coverage of its
• 19:26
  Speaker 1: network and really become competitive with the likes of Horizon, A,
• 19:29
  Speaker 1: T and T and T Mobile. I want to ask
• 19:32
  Speaker 1: about whether this is anti competitive or would this trip
• 19:36
  Speaker 1: any anti competitive wires. Josh, it shouldn't because wireless UM,
• 19:42
  Speaker 1: the wireless services that Sprint offers are complimentary more to
• 19:47
  Speaker 1: the wireline services that UM, Comcast and Trotter offer. It's
• 19:50
  Speaker 1: not taking away competitor in that space, unless you argue
• 19:54
  Speaker 1: that the wireless services could actually compete head to head
• 19:57
  Speaker 1: with UM the wireline services woul we don't actually see
• 20:00
  Speaker 1: in the market yet. You know, you've potentially seen that
• 20:02
  Speaker 1: with five G on on the last mile UM, with
• 20:05
  Speaker 1: wireless companies coming in and using back haul and a
• 20:09
  Speaker 1: five G basis, But this is years out potentially, Matthew,
• 20:12
  Speaker 1: what is your thought and maybe just reference Verizon and
• 20:15
  Speaker 1: its files product because that is trying to do the
• 20:18
  Speaker 1: triple play bundle. So triple plays are very popular in
• 20:21
  Speaker 1: the US, but we haven't taken the step like a
• 20:23
  Speaker 1: lot of the internet, home phone, and and TV services UM,
• 20:29
  Speaker 1: but we haven't taken the step to quadruple plays, which
• 20:31
  Speaker 1: bundle mobile services and they're like a lot of European
• 20:34
  Speaker 1: countries have. I think one of the issues is the
• 20:36
  Speaker 1: geographic constraints. We don't have national fixed line providers. Comcast
• 20:40
  Speaker 1: isn't national, Charter isn't national, Files isn't national, whereas in
• 20:44
  Speaker 1: France or the Netherlands, much smaller countries it's easier to
• 20:47
  Speaker 1: have a national footprint UM and so you know, the
• 20:50
  Speaker 1: geographic constraints really make it difficult to offer those quad
• 20:53
  Speaker 1: play services on a national basis, which is why it's
• 20:55
  Speaker 1: really never taken off thank you so much for joining us.
• 20:58
  Speaker 1: Matthew Kanterman, Telecom and video game analyst for Bloomberg Intelligence.
• 21:02
  Speaker 1: Also our thanks to Joshua yatsquits Uh Telecom, Cable and
• 21:05
  Speaker 1: Media analyst for Bloomberg Intelligence. Uh. I just have to wonder,
• 21:10
  Speaker 1: you know, Sprint, it's been on the table for a
• 21:12
  Speaker 1: while and it's been looking for some kind of bailout.
• 21:14
  Speaker 1: It's interesting that two big cable companies are coming to
• 21:17
  Speaker 1: it at the same time. You never know. Well, in
• 21:32
  Speaker 1: Europe we actually have had quite a big move in
• 21:36
  Speaker 1: government bond yield. You can see two year German yields
• 21:39
  Speaker 1: rising to their highest level in about a year, albeit
• 21:42
  Speaker 1: still negative half percentage points, so not not terribly high.
• 21:45
  Speaker 1: Let's just say I still haven't gotten it's all relative.
• 21:48
  Speaker 1: But I want to bring in Simon Ballard who has
• 21:50
  Speaker 1: a better sense on all of this and can give
• 21:52
  Speaker 1: us some perspective on why we're seeing this move and
• 21:55
  Speaker 1: why we're hearing about ECB tapering. Simon Ballard is a
• 21:59
  Speaker 1: global it Strategies for bloom Brock News in London. Simon,
• 22:03
  Speaker 1: why did e CBS Mario drags speech today? Well, Mario
• 22:08
  Speaker 1: drag speech at the ECB Forum has addressed the tapering issue,
• 22:12
  Speaker 1: which has been on many people's lips and in certainly
• 22:14
  Speaker 1: in their minds for for many months now. The the
• 22:17
  Speaker 1: asset purchased program, the quantity of easing program that the
• 22:20
  Speaker 1: ECB has gone through over the last couple of years,
• 22:23
  Speaker 1: comes to a tentative end or schedule end at the
• 22:25
  Speaker 1: end of this year UM. And so the question now
• 22:28
  Speaker 1: really is how will the market react when the support
• 22:32
  Speaker 1: mechanism is tapered, is taken away, be it through asset
• 22:35
  Speaker 1: purchases being reduced. And you've seen that this morning. We've
• 22:39
  Speaker 1: had Missie of Dragg suggesting that all being well, the
• 22:42
  Speaker 1: the nascent recovery in Europe will allow them to taper
• 22:46
  Speaker 1: or at least to sort of scale back accommodation between
• 22:49
  Speaker 1: now and the end of the year or certainly the
• 22:50
  Speaker 1: early part of two thousand eighteen. And that's why we've
• 22:52
  Speaker 1: seen this, this this rising government yours. As you say,
• 22:55
  Speaker 1: we're still deeply negative. We've still got major issues over
• 22:57
  Speaker 1: here to consider, um. But it is a move in
• 23:00
  Speaker 1: the right direction as far as Mr Drug is concerned.
• 23:02
  Speaker 1: And it's certainly moving the euro today against the dollar
• 23:06
  Speaker 1: one eight one right now, that's a gain of eight
• 23:09
  Speaker 1: tens of a percent. You know, I gotta ask you.
• 23:11
  Speaker 1: You know, the European Central Bank seems to be an
• 23:13
  Speaker 1: equal opportunity lender. In other words, they'll buy on most
• 23:16
  Speaker 1: any Euro Area investment grade non financial debt. I mean
• 23:20
  Speaker 1: it includes US debt, Swiss debt right as well as
• 23:24
  Speaker 1: all of this other They've added what billion euro billion
• 23:29
  Speaker 1: the corporate bond purchase program. The corporate purchas program, which
• 23:33
  Speaker 1: has been running since June of last year, has been
• 23:35
  Speaker 1: accumulating bonds probably about one and a half to two
• 23:38
  Speaker 1: billion a week. So as you say, just to just
• 23:40
  Speaker 1: shy of the hundred billion mark. Now, um, yes, the
• 23:43
  Speaker 1: restrict parameters for the for the bonds that they can
• 23:45
  Speaker 1: buy its investment grade, they have to be euro domiciled. Um.
• 23:48
  Speaker 1: But you know there are U s issuers that have
• 23:51
  Speaker 1: a European base whose bonds have also found their way
• 23:54
  Speaker 1: into the CBS portfolio. And it's had a dramatic effect
• 23:57
  Speaker 1: on spreads over the course of the last year. While
• 23:59
  Speaker 1: we've seen sort of ebbs and flows and some modest
• 24:03
  Speaker 1: widening through to mid two thousand and sixteen, there really
• 24:05
  Speaker 1: has been a consistent, consistent tightening across the credit spectrum,
• 24:09
  Speaker 1: not only through the bonds that the ECB has been buying,
• 24:12
  Speaker 1: but I'd point out perhaps many in US has been
• 24:14
  Speaker 1: crowded out further down the quality curve, further down the
• 24:17
  Speaker 1: credit curve, unable to buy the bonds because of the
• 24:19
  Speaker 1: CBS reduced liquidity in those sectors. So we've seen the
• 24:23
  Speaker 1: dramatic apt forms, even if we can't really quantify exactly
• 24:25
  Speaker 1: what the ECB has done. You know, Simon, I think
• 24:28
  Speaker 1: it's so interesting the market response to Mario drugs speech,
• 24:31
  Speaker 1: because first it was rather ambiguous. It wasn't like it
• 24:34
  Speaker 1: came out and said we're planning to discuss tapering and
• 24:37
  Speaker 1: two months and then get it done by the end
• 24:38
  Speaker 1: of the year. I mean, it was very ambiguous and
• 24:40
  Speaker 1: you could kind of read into it what you wanted,
• 24:43
  Speaker 1: but it seemed to hint at some kind of normalization.
• 24:45
  Speaker 1: That's number one, But number two, the response has been
• 24:48
  Speaker 1: pretty significant in US markets too. We saw the thirty
• 24:50
  Speaker 1: year yelled in the US rise the most in almost
• 24:53
  Speaker 1: two months, and it makes me think the ECB is
• 24:56
  Speaker 1: absolutely the central bank that's in control right now of
• 24:58
  Speaker 1: global bond markets, which you agree, well, I think there's
• 25:01
  Speaker 1: sort of there's a very very solid link between all
• 25:04
  Speaker 1: global central banks, and more importantly, the rhetoric between the
• 25:07
  Speaker 1: central banks um and the fact that the ECB is
• 25:10
  Speaker 1: even hinting at, albeit with as many caveats as you'd
• 25:13
  Speaker 1: like to offer, um, that they would like to move
• 25:15
  Speaker 1: to a tapering sort of position later this year is
• 25:19
  Speaker 1: positive really for for the global economy because to a
• 25:22
  Speaker 1: certain extent, the ECB, the eurozonees economy has been a
• 25:25
  Speaker 1: drag on the US has been a drag on sort
• 25:27
  Speaker 1: of the global growth picture. So if that starts to improve,
• 25:30
  Speaker 1: then we can start to take a more positive spinum
• 25:34
  Speaker 1: to a sentiment within the US as well. Simon, is
• 25:36
  Speaker 1: it possible that the European Central Bank, and of course
• 25:40
  Speaker 1: we don't know what the Federal Reserve is going to
• 25:42
  Speaker 1: do specifically with its own balance sheet, but the central
• 25:46
  Speaker 1: banks have gone out to buy the best and have
• 25:49
  Speaker 1: therefore crowded everybody else in to buy the junk, when
• 25:53
  Speaker 1: it really should have been the other way around, because
• 25:56
  Speaker 1: now you have a situation where they don't know what
• 25:58
  Speaker 1: to do with this. They could sell it into the market,
• 26:00
  Speaker 1: but what would that displace? You'd sell your junk, and
• 26:03
  Speaker 1: by this investment grade that they were selling back. Absolutely.
• 26:06
  Speaker 1: I mean that's the big questions to you know, when
• 26:08
  Speaker 1: you start tapering. And we discussed this about the Bank
• 26:10
  Speaker 1: of England, who's whose corporate bond purchase program ended ending
• 26:14
  Speaker 1: earlier this year. Um, it's what they do with the portfolio,
• 26:16
  Speaker 1: whether they manage, whether they actually look to sell the
• 26:18
  Speaker 1: bonds that they've accumulated over the last couple of years,
• 26:20
  Speaker 1: which I think would be disastrous for the market, and
• 26:22
  Speaker 1: and and and send spread significantly wider as they start
• 26:25
  Speaker 1: to liquidate their holdings. They can they could extend the program,
• 26:29
  Speaker 1: of course, you know that we're talking about tapering, but
• 26:31
  Speaker 1: if anything happens between now and the end of the year,
• 26:33
  Speaker 1: some surprise shock on a macro oil commodity related aspect,
• 26:37
  Speaker 1: then you know there's the possibility that they extend or
• 26:40
  Speaker 1: they run rate of seven billion, right, seven billion euros absolutely,
• 26:44
  Speaker 1: if they if if the if the needs there, then
• 26:47
  Speaker 1: thank you very much. Well I'm sure he'll be, he'll be.
• 26:49
  Speaker 1: They've given us, they've they've they spent so much time
• 26:51
  Speaker 1: and energy getting to the position now of bringing down
• 26:54
  Speaker 1: funding courts for trying to and you could you could
• 26:56
  Speaker 1: argue that the funding mechanism wasn't broken for European corporates
• 26:59
  Speaker 1: before they started this, But nevertheless, funny cost have come
• 27:01
  Speaker 1: down so dramatically over the course of the last year
• 27:03
  Speaker 1: that they're certainly not going to do anything to jeopardize
• 27:05
  Speaker 1: the position that they've got themselves into now by tightening
• 27:08
  Speaker 1: too early. But at the same time, they are keen
• 27:10
  Speaker 1: to move back to a normalization starts just as the
• 27:12
  Speaker 1: Federal Reserve is in the United States. Real quick, simon,
• 27:16
  Speaker 1: is Mario track you just responding to German pressure to
• 27:18
  Speaker 1: get rid of this acid purchasing program. I think at
• 27:22
  Speaker 1: the end of the day, he's paying lip service to
• 27:23
  Speaker 1: to to Chancellor Merkel. Yes, and they've been one of
• 27:26
  Speaker 1: the the one of the big argues against against QUI
• 27:30
  Speaker 1: in its current form for for many months now. So
• 27:33
  Speaker 1: you know, it is politics. It is it is trying
• 27:35
  Speaker 1: to massage the political relationships across the across the divide,
• 27:39
  Speaker 1: the divide within the Eurozone, should I say, But at
• 27:42
  Speaker 1: the same time, I think he is he's he's he
• 27:44
  Speaker 1: needs to recognize that. You know, the efforts of the
• 27:46
  Speaker 1: ECB have been positive over the last over the last year,
• 27:49
  Speaker 1: and so I want to thank you very much. Simon Ballard,
• 27:52
  Speaker 1: global credit strategist for Bloomberg, joining us from London, and
• 27:56
  Speaker 1: we didn't even get to talk about Brexit. Next time.
• 27:59
  Speaker 1: Next time. That's uh, Simon Ballard joining us really great,
• 28:03
  Speaker 1: great stuff. Read more about it at Bloomberg dot com.
• 28:08
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 28:11
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
• 28:15
  Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
• 28:18
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
• 28:22
  Speaker 1: abramoids one before the podcast. You can always catch us
• 28:25
  Speaker 1: worldwide on Bloomberg Radio