This could be a good week. On top of your communications report, there's positive news re: IMF and Brazil:
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SATURDAY DECEMBER 5 1998 Americas
BRAZIL: Central bank says IMF deal is safe
By Geoff Dyer, Andrew Balls and Richard Lapper in Rio de Janeiro
The International Monetary Fund's $41.5 (£25bn) package of financial assistance for Brazil will not be affected by the government's damaging defeat in Congress this week, Gustavo Franco, president of the Brazilian central bank, said yesterday.
Mr Franco said the government would push ahead with its controversial pension reform, despite Congress's rejection on Wednesday night of a proposal to increase civil service pension contributions.
The measure, which accounts for R$2.5bn (US$2bn) of the R$28bn savings the government had planned to take from next year's budget, would be sent back to Congress early next year, he said. Mr Franco added that the government would find other savings to meet the fiscal targets agreed with the International Monetary Fund as part of the aid package, which will be reviewed in February.
"The vote does not change anything as regards the agreement with the IMF," he said yesterday. "There is a target. We have to meet it one way or other . . . we will offset the loss with something else."
Brazilian share and bond prices fell sharply on Thursday, including an 8.8 per cent drop on the São Paulo stock exchange, after the defeat raised fears that the government would not be able to approve all of the fiscal austerity programme.
Some economists have suggested that the second tranche of the IMF package, which becomes available if Brazil meets the conditions of the February review, might be endangered by the pension vote. Financial markets rallied slightly yesterday, with shares in São Paulo 0.7 per cent higher by late afternoon.
The government announced the tough fiscal plan last month to prevent its currency from becoming the latest victim of the financial crisis in emerging markets.
Ministers have consistently claimed that pension reform is the cornerstone of the austerity measures, aimed at cutting a budget deficit of almost 8 per cent of gross domestic product.
"The pension issue is unfair and has to be addressed," said Mr Franco. "There is no point in taxing other people and cutting public expenditure to preserve an unbalanced pension system."
The deficit on pension payments to the 900,000 retired federal civil servants is expected to be R$18.3bn this year, more than a quarter of the total budget deficit.
Mr Franco added that the political will existed to approve all the fiscal measures: "This is a championship and we have been winning all the games. We have lost one, but there will be more."
José Júlio Senna, chief economist at Fleming Graphus in Rio de Janeiro and a former central bank director, said the pension defeat had not derailed the fiscal austerity programme. However, he added: "It sends a very bad signal to the market. It demonstrates disorganisation in the political side of the government."
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From WSJ, China lowers bank rates:
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December 7, 1998 [The Wall Street Journal Interactive Edition]>
China Lowers Its Interest Rates
To Spur Growth, Halt Deflation
By PETER WONACOTT
Dow Jones Newswires
BEIJING -- In a surprise move aimed at halting price deflation and reviving economic growth, China's central bank Sunday cut interest rates on both deposits and loans by an average of 0.5 percentage point, Chinese state media reported.
The interest-rate cuts will take effect Monday , the Xinhua news agency reported. According to Xinhua, three-month deposits at Chinese financial institutions won't change, but rates on one-year fixed-term deposits have been sliced to 3.78% from 4.77%. Cuts on other deposits weren't specified.
The benchmark one-year loans now carry an interest rate of 6.39%, down from 6.93%.
Meanwhile, the central bank also reduced interest on deposits financial institutions must hold on reserve to 3.24% from 3.51%.
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And from MSDW, some stats lifted from Friday's "Industry Overview" by Mary Meeker:
Roper Starch Worldwide (a market and opinion research firm founded in 1923) and America Online released a study on Internet usage yesterday showing that nearly half (44%) of current Internet users say Internet/online usage is becoming a necessity.
The first-ever "America Online/Roper Starch Cyberstudy 1998", using a sample of 1,001 adult Americans who subscribe to online and Internet services from home, revealed that more than three-quarters (77%) of the online population believe that being online has made their lives better.
On e-commerce, the study found that 71% of the online consumer population say they regularly or occasionally go online to get information about products to buy, both on- and off-line.
Our favorite finding --- 67% of those polled said that if stranded on a desert island, they would prefer a computer with an Internet connection, as opposed to 23% who said they would want a telephone and 9% who replied that they would prefer television.
79% of users said the computer would be considered the msot important invention of the 20th century. Yippee!
By our estimates, Internet users will have climbed 105% Y/Y to 82MM by the end of this year; Internet advertising and commerce have also grown like Kudzu. Further, an October study by the Opinion Research Corporation showed that 7 Internet companies had achieved "mega-brand" status --- 55MM adults now recognize AOL, Yahoo!, Netscape, Amazon.com, priceline.com, Infoseek, and Excite.
This new Cyberstudy reaffirms our belief that the Internet has come of age. Again, we believe that it's only second or third inning of the evolution of the Internet.
OTHER POINTS
71% of the online consumer population has been online for under three years and 29% has only been online for a year or less. (Translation: The Internet remains a very new phenomenon to most users.)
When asked about 16 everyday activities, more than eight in ten respondents said engaging in those activities online was either "much or somewhat easier" than "the way they used to do it." Leading this list of activities deemed "much easier" to do online were tracking stock portfolios and trading stocks.
87% say they regularly or occasionally go online to communicate with friends and family and 94% say that the online medium makes communication with friends and family much or somewhat easier than methods they used before.
80% of those using Internet and online services today have suggested to friends and family that they get online.
69% of those online feel that it "is important for children today to know how to go online and use the Internet.' And almost half (47%) of them believe that being online has a more positive influence on their children than watching television (35%).
Of those in the population who own a laptop computer, almost half (47%) take it on vacation.
26% of all online users check their e-mail on vacation.
Already 87% of the entire online consumer population says they would miss online access if it were no longer available to them.
As the population spends more time online, they are more likely to miss it and to see the medium as a necessity. 64% of those who have been going online from home for three years or more say they would miss online access "a lot" and that "using an online or Internet service is just about a necessity to me."
When compared with other Roper research, the above results suggest that the Internet online medium has already surpassed VCRs, stereo systems and cable TV as a necessity for those in the population who have access to them.
56% of those over 50 said they would miss having online access if it were no longer available compared to 47% of those aged 18 to 24.
The online population over age 50 is more likely to use the medium to manage and plan their finances, while those between the ages of 18 and 24 are more likely to use it to socialize.
87% of respondents say they go online to communicate with friends and family. In addition, when asked how the medium makes their life better, 35% of the responses given related to communications activities.
Nearly seven in ten (69%) of those surveyed agree that "using e-mail hasmade it easier for me to stay in touch with family and friends."
The survey also revealed that the online medium also appears to bring people together in the home. Specifically, eight in ten parents with children under 18 say they sometimes go online with their children and 66% say that they sometimes go online with their spouses.
Almost three in ten people online say they regularly or occasionally "meet new people with common interests online." Of those who meet new people online, 91% say it is easier than offline.
Women have sparked the growth of Internet online in the last 12 months --- accounting for 57% of the new home online subscribers during that period. This recent trend has boosted the women's share of the interactive medium to 47%.
The study also reveals that the vast majority of the online consumer population would not characterize themselves as experts. Almost three-quarters (73%) of the populations would characterize themselves as "novices" or at an "intermediate level" of expertise.
65% of the interactive population is over age 35. These consumers are more likely to have graduated from college, to be married, to have children under the age of 18, and to represent a higher median household income bracket than the American public at large.
Online consumers are twice as likely than the average American to be an Influential American (21% vs. 10%), as defined by Roper Starch. This means that they are more likely to have attended a public meeting on town or school affairs (41% VS. 14%), contacted a politician (27% vs. 13%), attended a political event (15% vs. 5%) or written a letter to a newspaper (12% vs. 5%) than average Americans.
Although e-commerce has only been widely available for a few years, of the American consumers online today, 45% say they have ever made purchases online and 31% make purchases "regularly or occasionally."
Already 85% of those who shop online regularly or occasionally believe shopping online is much or somewhat "easier than the way they used to do it."
Fully 59% of those who have been online for three years or more have made a direct online purchase.
Of those who have been online less than one year, 22% say they make purchases online regularly or occasionally; of those who have been online for under three years, 29% say they make regular or occasional purchases; and of those who have been online for three or more years, 43% say they make online purchases regularly or occasionally.
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From FT, Deutsche Telekom considers acquisitions:
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December 7, 1998 <Picture>
Business and Finance - Europe
Telekom Says a Merger
May Be Key to Strategy
A WALL STREET JOURNAL News Roundup
BONN -- Deutsche Telekom AG's top executive said consolidation in the global telecommunications industry has left the company little choice but to seek out a strategic acquisition or possibly pursue a merger with another company.
Ron Sommer, quoted in an interview with the German weekly Bild am Sonntag, said the wave of big mergers sweeping through the global banking and automobile industries would also touch the telecommunications sector.
Telekom, which is still majority-owned by the German government, must be prepared to initiate such a merger or acquisition or risk being swallowed up by a foreign company, which could jeopardize Germany's role as an industrial center and cost domestic jobs, he said.
"For an industrial nation like Germany, it will be vital that industrial giants have a headquarters in Germany, not just for automobiles but also for telecommunications," Mr. Sommer said in the interview, which was published Sunday.
"In Germany, this applies to Deutsche Telekom. That's why we cannot avoid buying or merging with other companies in order to become a global player," he said.
Telekom, Europe's largest telecommunications group, has made major international investments in the past, including a small share swap with France Telecom SA, as well as the two companies' joint holding of 20% stake in U.S. long-distance carrier Sprint Corp. Telekom also shares joint majority control with its partner Ameritech Inc. in Hungarian phone company Matav RT.
Mr. Sommer also said in the interview that the company was on schedule to reduce its work force by 60,000.
"We have already shed 40,000 jobs, and we want to cut a further 20,000 by 2000," he said. Telekom said last month its payroll fell to 184,000 in the first nine months of 1998, from 195,300 at the end of 1997.
In the run-up to its 1996 initial public offering, Telekom reached a deal with Germany's postal workers' union to reduce its work force to 170,000 employees by 2000 from 231,000 in 1994. No further job cuts are planned at this time.
Telekom spokesman confirmed Mr. Sommer's comments, adding that the company had no specific plans for a merger or acquisition at the moment.
Addressing Telekom's immediate plans, Mr. Sommer said previously announced price cuts, slated to take effect on Jan. 1, would cost the company between five billion marks and six billion marks ($2.99 billion to $3.59 billion), but he added that he hoped this could be offset by higher call volumes and cost reductions.
The new price reform will also include a reduced rate for dialing into the Internet, Mr. Sommer said.
According to a separate advance copy of an article in Focus, a weekly news magazine, Germany's top telecommunications regulator will approve Telekom's proposed price cuts this week.
The company, facing stiff competition in the long-distance market since public phone service was liberalized in January, plans to slash national long-distance calling charges by 36% during the peak hours of 9 a.m. to 6 p.m., to 36 pfennig a minute.
Regulatory officials weren't available for comment.
Mr. Sommer also said Telekom would do "everything possible to pay shareholders an attractive dividend in 1999." For 1997, Telekom paid 1.20 marks per share.
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