March 12, 2001 Kerry Takes a Bath; Is Rupe out of the Loop?
Packer takes a beating on an Indian investment; Murdoch's DirecTV plans hit another hitch; Telstra boss shies away from new tech investments.
By Andrew Birmingham and Ronda Field
It has been a bad news week for Australia's moguls. It transpires Kerry Packer has dropped $300 million on an investment in India over the last year, and Rupert Murdoch's dream of buying up satellite company DirecTV is turning sour, according to the Sydney Morning Herald. (The Age also carries the Packer story.)
First the Big Fella, and let's begin with a riddle: how does Australia's Richest Man find himself in the middle of an $89.31 million Indian investment? Answer: Easy, he starts with $380 million and sinks it into a struggling telecommunications company, in this case Himachal Futuristics Communications. The report first appeared in the Times of India, which quotes a sanguine Channel Nine spokesman thus: "We do not comment on our individual investments." Indeed, and especially not on turkeys like this.
There is a nice sting in the story too. The Herald says one of Packer's main partners, influential stockbroker Ketan Parakh, is helping to put the market (and thus KP's shares) into a tailspin through his bearish behaviour. You know Ketan, we have a saying in Australia, "Everybody gets one Alan Bond in their life."
Spaceman Rupert Murdoch, on the other hand, may have to cancel the ignition sequence on his satellite dreams. There has been increasing press speculation that plans by Australia's Richest American to buy satellite television company DirecTV are coming a cropper. Now it appears that Hughes Electronics chairman Michael Smith wants the Rupe out of the loop. His plan entails spinning Hughes, which owns DirecTV out of General Electric, without the assistance of the Dirty Digger.
The story has Smith trying to coax Microsoft out of the News Corp camp and into bed with Hughes, a delicious irony that won't be lost on Australian Microsoft partner Kerry Packer, who could presumably do with a decent laugh right now.
Postscript: Meanwhile, one-time wannabe media mogul Ziggy Switkowski has acknowledged that Telstra's internet company is not really raking in the profits. Of course, there's no reason it should at this stage of the investment cycle, although the company is now a little more gun-shy about small-tech equity investments. After forays into Solution 6 and PCCW, it's hard to fault this logic.
The Australian Financial Review reports that Cisco is beginning to feel the heat of the economic downturn, after it announced that it would be cutting some of its temporary staff. John Chambers, Cisco's CEO, issued a grim outlook in the report, saying that capital spending had dropped off, and that this trend could continue for the next two quarters. Although no official word has been given to the unlucky bunch who get culled at Cisco, it is anticipated that they will be lost from the sales and marketing arm.
Meanwhile, the troops are rallying down at the ICANN conference in Melbourne, where domain-name registrars, ISPs and e-commerce companies are teaming up to force the ruling body to renegotiate its agreement with US registry VeriSign. The contract, which has given VeriSign the right to continue operating the master registry of web addresses and function as a dot-com registrar until 2007, has been howled down under the pretence that it will undermine the competition that is beginning to emerge.
The Fin also reports that Amazon's Jeff Bezos is likely to just scrape past the talons of the US Securities and Exchange Commission, after it launched an investigation into insider share sales that preceded a negative research report. Amazon had perused the report prior to it being published, but the Fin reports that the SEC would have a hard time making a case of it, given that much of the information in the report was already common knowledge, and that Amazon shares actually rose after it was released.
In the neverending story of the C&W Optus negotiations, The Australian and the Fin offer varying stories on SingTel's interest in the carrier. The Fin says that SingTel would only pay a "reasonable price" for C&W Optus, while The Australian puts a figure on the bid, saying that SingTel had reportedly made an offer of $17.5 billion for the entire spectrum, making it the largest corporate takeover in Australian history. Stay tuned for the real story.
Meanwhile, Ben Potter at the Fin writes a piece on the telco industry, and whether or not consumer demand will be enough to sustain the Telstra-C&W Optus duopoly as well as the rash of junior telcos that are appearing of late.
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