Transcripts For BLOOMBERG The Pulse 20140501

I am Francine Lacqua. Also coming up, we try out the bendable sunglasses that kids cant break or lose. This is serious business. My children love destroying sunglasses, anything they can get their hands on. Plus, the church of buffet. The oracle of omaha has inspired thousands of investors. We sit down with one of his most faithful followers. First, a bloomberg exclusive. We have been speaking with italys newly appointed finance minister. He told us he would welcome further depreciation of the euro but he doesnt expect it to happen. Offario draghi has taken the table the risk of the breakup of the eurozone. This benefits all eurozone members including italy. Italy are growing again, exiting the recession. The challenge for italy is to make that growth which is too fragile, much more consolidated and resilience. This is where a italian policy comes in. Broad and launching a ambitious structural reform reform ascluding tax well as measures to boost economy in the short term. We strengthen the recovery and make it more sustainable over the mediumterm and more job rich. Any concerns about the italian banks . We have the stress test results not the result, but the stress test tests that they will be put through. They need to be credible. Will they be credible . The comprehensive assessment needs to be credible. This is a need that all european banks face. We need to be convinced and d that the system will be fully repaired. Italy has gone through two years of very deep recession. In spite of that, italian banks have proven to be highly resilient. There are nonperforming loans but banks are rebuilding their capital. I am convinced that in a short time there will be normal conditions to lend to the economy and support growth. There seems to be a lot more open talk from france that we need a lower euro. Certainly a lower euro would help the european economy. It would take off some of the pressure towards deflation in europe. One thing is to think that a lower euro is useful, which i share. The other thing is to think that we can target the euro. This is not something that is feasible. How do youtually explain the fact that the euro has been so high . If the fed starts this program of less accommodative monetary policy, is it a consequence that the dollar should go up . We tend to forget one fundamental element, that recently the eurozone has turned into a large current account surplus situation. That adds to the strength of the euro. Fundamental variables driving currencies have to do with growth and in this case higher growth in the euro in the u. S. Why is that happening . This is a bit of a puzzle. There is no obvious reason to see a strong depreciation of the euro coming up to reagan i would coming up. I would really welcome a softer euro. This is different from the Exchange Dynamics in the short term. That was italys finance minister speaking to us in an exclusive interview. You will hear more from him shortly. Lets turn to another bloomberg exclusive. Sprint is planning a bid for tmobile. We are joined now by our International Correspondent, hans nichols. And Matt Campbell is in london. Hans, lets start with you. Lets figure out exactly what this eel looks like in terms of timeline. How long before we get to a deal being announced . According to people familiar junejuly iser, when the formal offer would come. It would come from sprint which is owned 80 by softbank. Here is the news. You have these executives from sprint who are lining up the financing. They have spoken to six banks. You can look at that as a sign of caution or confidence. Caution because they simply want to be ready if and when they get Regulatory Approval. They have two hurdles to clear, to clear. Softbank and sprint think they can jam this through. There is a Regulatory Environment somehow different from 2011 when at ts attempts u. S. , when ite fell through. I would be curious on that and whether he thinks this is caution, confidence or a mix of both. I see this as almost a regulatory story. Secondarily, a business story. Obviously, muska gushy Masayoshi Son wants to do this. He is an aggressive guy. Whether there is willingness in washington is really the 40 billion or 50 billion question. At t found this out the hard way. I dont think sprint wants to see that. We have seen in europe a couple attempts to go from four mobile players to three. That is still tied up in the regulatory weeds. I dont think this is a slamdunk at all. How much of the story is the fact that Masayoshi Son is involved . He is the chief executive officer of softbank which owns 80 of sprint. We understand he is trying to build an argument to convince regulators. Can he do it . Like he doesnt give up. He doesnt give up. This guy is a journalists stream. He wants softbank to be the most important Telecoms Company in the world. You cant take to the Regulatory Industries in washington. A lot of companies have found that out. They will make a case. One thing i thought was interesting in alexs excellent story, was that Masayoshi Son doesnt want to include a big rig up the. When at t did this with tmobile, there was about a 7 billion breakup fee. Tmobile became a much stronger competitor than it was before. Softbank wants to avoid that. I would be interested to get both your takes on that. Do you think that signals he is saying i am not 100 sure . Mission may be that the regulatory story is not on his side. It is a bit of a hedge. We dont know what the number is going to be in the attempt to take over tmobile. Isthing south of 7 billion an indication that they are not as confident as at t was. At t was overconfident. I remember talking to bankers who were convinced this was going to go through. They thought it was a layup. Everyone was so shocked. Now we have mr. Son making this play. Perhaps the only ceo that is more interesting than Masayoshi Son would be john legere, the ceo of tmobile. Next time, we are all going to wear pink tshirts. Not a problem for me. I can do that. We can all do that. Matt doesnt normally wear a tie. He is looking very smart. Would be much more in keeping with my usual look. Thanks very much, hans nichols out in berlin. Campbell herematt in london. A tonight, dont miss conversation with the tmobile president and ceo, john legere. Lets move on. Lets go from telecoms to television. Bskyb shares are rallying and shares are advancing. Ryan chilcote has been watching this story as the tv landscape changes. The numbers, ryan . Third is just one number you need to Pay Attention to, 74,000, that is how many paytv subscribers btb bskyb added. That defies expectations from the analysts who thought this lose skyrter bskyb may tv customers, may see a drop, which didnt happen. Dough andome serious has been somewhat successful in bringing tv customers to its business. Billion topent 1. 5 get rights to Champions League games. There has been an astounding amount of money to get those 38 games per premier season. We still have some pretty good results today from bskyb which is going to give bt a running going forward. Ryan, thank you so much for all of that. Here is what else is on our radar. Passengers are facing long delays at several u. K. Airports. The glitch on computers caused chaos at heathrow and elsewhere. Say engineerses are working nonstop to resolve the problem. Actor kevin spacey sat down with charlie rose. They spoke about what goes into making the hit series. It is so much fun because i am heavily involved in it. We all grapple with it, we talk about it and discuss it. Andve an idea and we play he says, your idea is terrible but that led me to this idea. There is this remarkable journey that we are all on. The funnest part is that there are so many things i dont know yet. You can catch the full interview on charlie rose a little later today. The fed says it will continue to scale back stimulus as the u. S. Economy continues to recover. The central bank is on track. Interest rates will remain close to zero for a considerable time. Up next, you cant always get what you want. Italys finance minister says he would love the euro to weaken but doesnt expect it to happen. Is he more optimistic about his countrys rose goals . We will bring you more next. Welcome back. Lets get back to a bloomberg exclusive. We have been speaking with italys finance minister. You heard him say that targeting a weaker euro will not work. We also spoke about growth targets and whether the governments forecast is actually realistic. I do hope that we can do better than that. Although i cannot say that more explicitly, i think that there are good reasons to think that we will have a surprise. Upside surprise, by what . Led by a combination of support measures to low income families, support measures to companies and to a boost in confidence. What is your take on the deficit . Does the European Union need to be more relaxed . The fiscal position in italy is extremely stable and in line with targets. Expectedal deficit is 6 this year and yea declining next year. The debt will start declining next year and continue to do so. State that the current fiscal position is absolutely under control. If i may add, figures look better in italy than in other countries. Is there a danger that because markets have gone up quite a lot and there is a lot ,f confidence in the markets that there is not that third check on the markets . Certainly markets are very benign these are the Investment Opportunities in the periphery. A risk of complacency. I would describe the situation a bit differently. Windows a very favorable of opportunity with growth resuming and financial conditions easing and Market Opportunities increasing. Must strengthen this window of opportunity by making growth more stable, more resilient, more jobrich. Finding ways to make a budget balance, which is more growth friendly. Italys finance minister speaking to us in an exclusive interview. Lets get some reaction to his comments. We are joined by an economist at deutsche bank. Thank you so much for coming in. Italy is on a path to recovery but it is going to be slow and painful. Does it help . If the reforms dont go through, we are back to square one. Finance minister is saying in terms of shortterm growth maybe we are less optimistic. The problem of italy is not the fiscal deficit. The problem is growth. Without reforms that have to be approved by the parliament and , that is really the problem for italy. Does italy need to renegotiate its compact . I dont think so. Improve potential growth by a higher deficit. But you sometimes need to prime it. It is easy to do structural reform when the commie when the economy is starting to pick up speed. Structural reform in a low growth environment is difficult. You prime the pump, start the motor running and then start anchoring. Referring to the experience of germany. Strictlyt follow very. We are in a recovery stage and italy has got a public debt a bit higher than what germany had. I still think that the Structural Reforms they need do not require big deficits. They require implementation. I still prefer to see more work on Structural Reforms rather than saying it might be easier. That was the point i was making. It you look at the Structural Reforms, it boils down to the problem italy has had before. Politics, it is mustering the support to push these reforms and have the dozens of Political Parties backing matteo renzi. Is he the guy that is going to push this through . If he doesnt, does italy have a chance . It is more likely that renzi then berlusconis government. Willingness to implement Structural Reforms. Renzi does have a fragmented majority behind him. However, it is also in the interest of the party. So renzi has to master the actually giving up implementing reforms. Institutional reform or structural reform . One presumably has to go handinhand with the other. Get the institutional reform done, stable base, economic reform. That is a very good point. Understandalways ,hat without new electoral law a proportional system would create a stalemate in the parliament. What you need for the new electoral law, you also need for the senate, a reform of the senate. The two are interlinked. To change the senate, you need constitutional reform. However, renzi does have the opportunity to push this through. Needse senate reform, he the support of berlusconi as well. It is always politics. Back to berlusconi. Never underestimate this guys power. He is one ofome, the richest people in the world but he lives like he is middleclass. He has inspired thousands to do the same. We sit down with one of Warren Buffetts faithful followers. Welcome back. You are watching the pulse. You are looking at live pictures coming out of athens, celebrating mayday today. The day of labor, the day of demonstration as it has become. The situation, relatively peaceful right now. Noisy but peaceful. Over in istanbul, we are getting reports of tear gas and plastic bullets being used as the turkish authorities clamped down on the center of the city. Here is manus cranny with your asset check. Ftse holding strong. A lot of europeans are closed. We will be closed necks monday. There is a couple of dimensions to play with when the markets come back in full. Saying, it isre sell and go away, that is something to be considered. China purchasing managers underwhelmed. The fed, they are happy with growth. In terms of the u. K. , there are a couple of big names driving the market. Chilcote, the only man that can turn the bskyb y into a ron burgundy story. Up four percent. Ealth management up at schroders. This is a big Management Company here in the u. K. Nicely. Doing quite the levels of earnings are up. We will talk about that story more with guy very shortly. In terms of the u. S. , it is going to be a pretty big data day. You get an initial jobless spending. Rsonal manus, thank you very much indeed. A as we had to break, just reminder, you can follow both of us on twitter. We are back in just a couple of minutes. Welcome back to the pulse live from bloombergs European Headquarters in london. I am Francine Lacqua and these are the Bloomberg Top headlines. Sony posted a net loss larger than forecast due to additional cost for the pc business. Sony is struggling to come up with new hit and demand for its traditional products but tvs declined. Manufacturing grew less than analysts estimated in april. Weakness in the worlds secondbiggest economy. Numbers above 50 signal expansion. The fed says it will continue to wind back stimulus as the u. S. Economy picks up pace. That puts it on track to bring qe to an end by the end of the year. Interest rates will be close to zero for what it calls a considerable time. The feds comments came after an official report said that u. S. Gdp barely grew in the first quarter. Feds decision, chief economist at markets. Com. What do you make of what the fed said last night . Steady as she goes. I dont think anybody didnt expect what we got. One of the points i want to mention here is that traditionally the fed has eight meetings a year. Saying, wee market saw what kind of activity it was yesterday, people are talking are we only going to have four real meetings when janet yellen has a press conference . Traditionally it has always been the week before and the week after the meeting was the blackout period. This blackout period is going to last less than 24 hours. She will make four speeches during the month of may before we get the minutes. It is going to be a situation where i think the only thing we saw in last nights minutes was that the economy is improving. We had a unanimous decision. Steady as she goes and we talk about steady. Important is it going to be, the next meeting . We have a press conference and we also have forecasts. As we saw with the gold ,elling off, the bond market sort of no real improvement. The key thing i am looking at and this is more from the european standpoint, yesterday when we got gdp numbers, we saw the euro selloff. This morning, it is 1. 3888. Of clientne a number seminars in Eastern Europe over the past six or eight weeks. Europe,see in eastern as much as eurodollar is going up, we are seeing hungary, poland, the czech republic, all of those being sold to buy the euro. Looking more away from the fed. What kind of dilemma is mr. Draghi going to have with the 1. 3875, heading toward 1. 39 . I would expect no change from the ecb. Going back to the fed, it is exactly what the market expected. We probably will not get even close to our first Interest Rate hike until the middle of next year. Bill, thank you so much for that. Guy, over to you for breaking news. We just had manufacturing data coming through from the united kingdom. This is april data. The data are much better than anticipated. 57 point tree was the number we were looking for. Cable continues to be welded. We are in touching distance of 1. 70. Nevertheless, a strong showing for sterling. Mortgage data, a little weaker than anticipated. That leads me to our next story. 22 ds Bank Delivering a rise in quarterly profit. Manus cranny has been digging through the numbers. What should i take away . Profit up 22 . We know the british economy is getting better. People are feeling stronger in terms of income. Costs are being cut. That is a blockbuster number. , we might are saying find it a bit tougher to earn good money on the money we are lending out. There is a beautiful line which opposed toloyds as chopping change at royal bank of scotland, they are running a simple, low risk business. They are ready to go back to regulators and say, we have done everything you asked us to do. Can we pay our dividends . The government now only owns 25 . If the numbers are right, lloyds could be offering you and i a 5 return. Not bad when you are getting deposits. If you have money on deposit in , the bank says we are slashing the rate by nearly 50 . See how the Mortgage Market works in the next few quarters. What they do is in the retail market. I think this ties up with the second part of the story, the stress test. The u. K. Regulators are saying we are going to stress the if house prices dropped by 35 . Rates at 4 . Ng that is a lot lower than the longterm average. That goes with what carney has been telling you. You get blockbuster numbers like that on the manufacturing side and you get dollarsterling trading did you say 170 . Think the big standout number, the stress test benchmarking at 4 Interest Rates, get ready for a dividend permission from the regulator. And we are waiting for the tsb ipo as well. It looks like that is going to come through in june. Thank you very much indeed, manus cranny. It has been a big morning for bloomberg exclusive. Let me bring you another one. Bayer coming closer to winning merck. Lets get more insight into what is going on here. Hans nichols is back for a little too rich to reckon. That is exactly right. This deal just got too expensive for them and they put out a clear statement acknowledging this fact. Said they when merck were thinking about putting this for sale, they put out 10 billion as a number. It creaked up to reports to 14 billion. Here is the quote from the ceo when you look at what is happening, this is more of a swap. Bayer would get rid of their animal unit and take Consumer Health from mark. That makes sense when you look at the numbers for bayer. They have a big strong part in their Consumer Health business but not much in the animal side. The deal was going to the all cash. That is one of the reasons it was more palatable. But we have an asset swap that might make more sense in terms of synergy. Cash sloshing of around out there. It is seeking a return. It will be interesting to see when this frenzy ever slows down. Do we get deals that are more weighted towards cash or assets what . This one that appears to be in place between abyer bayer and merck is more of an asset swap. Dealu look at the sprints we have been talking about, that is a lot of debt involved in that deal. Look, why can merck make this work . Give us the breakdown visavis ckittyou said about rei and the financing part of it . We are not certain on the financing. What we do know is an asset swap in terms of having more synergy and harmony between the units that are actionable moneymaking units where they have expertise. It is the same deal in the other pharmaceutical deal. You have assets that one company has waited more on the other side. The other has more in another place. This is a way to bring them into a core position. Claritin,coppertone, the antiallergy medicine. More ofld make bayer a Consumer Health product company. We will leave it there. Thank you very much indeed, hans nichols joining us from berlin. Francine, you well know our bayerer lets go from to buffet. Warren buffetts annual Shareholder Meeting is this weekend and thousands will dissent on omaha, nebraska for the woodstock of capitalism. Ryan morris will be one of the investors there. The 29yearold started when he was just a child. My name is ryan morris. I am 29. I am managing about 15 million. Warren said that he lives like he makes 150,000 a year. Except for the private jet. Before the berkshire meeting, we will pay our respect to the great churcher of realities. The four of us flew to kansas which was cheaper than omaha. We got the cheapest rental cars that we could find to drive and state in the crappy asked hotel i have ever been in. You go to these events where they have free drink and food. We got it down to 48 a night for the four of us in the busiest weekend of the year in omaha. Idea years old i had this that i wanted to change the world through science. My father introduced this idea to me that even if you are the best scientists in the world, you are not going to make Nuclear Fusion happen. The guys with a capital make those kinds of decisions. So that sort of flip the switch for me. Buffet. This guy i start reading his letters. Sounds very deceptively simple. I could do that. The fact that it was accessible at all to a 12yearold is just amazing. That goes to the power of how he can communicate in a way that is very primal and accessible. He says, try to choose your heroes wisely. He has been my hero since i was 12. Set the bestt has example that any business person ever has. Had a huge impact. Bei can see at 12 wanting to not warren buffett. All kinds of other things. Train driver, you name it i was there. Not a Hedge Fund Manager or major investor. Still to come, mayday. We look at whether tech takes over. By the ceo ofned Fast Future Research. Live will leave you with pictures of the mayday celebrations in athens. You are looking at the center of the greek capital. That is parliament in the top of the corner. Noisy demonstrations taking place at the moment. Looks pretty peaceful right now. The same cannot be said for istanbul. Welcome back. It is time for this weeks addition of our special series, small today. Parents dont generally like to spend much on kids accessories because they break stuff all the time. Babiators has come up with a product that kids cant damage. It is bendable baby aviators. We sat down with its cofounder. Are safe and stylish sunglasses for babies and young kids made out of rubber. They bend and twist and straighten and return to their natural shape. We came up with the idea in south carolina. My husband is an aviator for the marine corps. We were on the runway watching the pilots fly in. All the adults had sunglasses and the kids were squinting in the sun. We launched babiators when my partner carolyn and myself were cold calling childrens boutiques. We surveyed our friends who are parents. Their biggest complaint about sunglasses on the market was that they get lost. Thisarted toying with offer of, lets just replace them if they get lost. That is how we came up with the lost and found guarantee. We are the only sunglasses brand in the world that we know of that does this. I get reactions like, how do you stay in business . In the three years of selling babiators sunglasses, we have gone from one million to 2 million to a projected 4 million in sales. You have people that seek out the free pair but those are the most and is yeah stick brand ambassadors. You gave a free pair but you might have sold four or five more because of that one. About a year into working on babiators, we had our son. Lost sevenwinter, i different winter hats. My partners and i realized that we wanted to expand into different product. Why not make a hat . All these things get lost and should be replaced for free. That is what we are doing. Babiators, the future. My kids lose them all the time. It may help to find your children as well. I am all about the accessories. As we had to break it is time for todays post number. 100,000, that is how many people from trade unions are marching in russias red square for mayday. Communisthe year the union dissolved. When we come back, we are joined by the ceo of Fast Future Research to talk about whether your job is in danger. Tech is taking over. Mayday, mayday for the labor market. Welcome back. You are watching the pulse. You are looking at live pictures from athens, the center of greek i dont know, demonstration over the last few years. We have seen some major demonstrations. It is made a they are may day they areay celebrating today. We are looking at different stories out of istanbul where we are seeing teargas being used. Unemployment, a big focus today. This is the celebration of labor , celebration of workers rights. It is a good day to look at a story that is changing for all of us. The landscape of labor is changing. Tech is changing everything around us. Lets talk about what happens next. The Fast Future Research ceo is here to join us. How do we need to think about what is going on in our world . The pace of change is the wuthering. Jobs are going to be affected in ways we havent understood yet. Should i think about this as the Industrial Revolution or Something Different . I think what is happening now is a set of revolutions happening in parallel. We have Technology Replacing jobs, whether it is Artificial Intelligence or straight automation, robotics taking away jobs in thousands today and millions in the future. In parallel, we have a new set of revolutions happening. The biological revolution, British Airways is investing 600 Million Pounds in a new biofuels plant. Those didnt exist before. There are new industries emerging. We are going to see a whole set of new health care treatments emerging. People are living longer so there is an aging revolution. It is likely that the three of us will live past 100. The Fastest Growing age group today are the over 80s. Our children will probably live to 110 or 120. We have got a set of parallel revolutions happening. , thatt is the great news we will live to be 100. But how are we going to learn the new skills . That is the challenge. We can see there are opportunities, whether it is starting my own web venture, retraining to go into these new industries, we need to get people training again. We need to be encouraging people to do lifelong learning. We need to be giving tax breaks to companies to invest a lot more not just in jobrelated skills but in getting people the skills to learn how to learn again and recognize that if you are coming out of school today 16, 18, there is a chance you could have 10 careers in a working lifespan. You will probably work for a few years, take a couple off, work for a few, take a couple off through your life. We have to think very differently and also be giving incentives to the individual to say, take education that helps you find jobs in the immediate future but also invest in learning for the longerterm future. We have to recognize that making those choices today is far less expensive than having 30 to 40 permanently unemployed. This sounds like a world that sounds like it is going to be easier to navigate for the better educated. The divide that we are increasingly talking about in society in this world will only get bigger. Absolutely. What we have to do is recognize that it is not just about job specific skills. The world is becoming more complex. Skills like learning how to make decisions in a complex world, learning how to navigate uncertainty, learning how to plan for a range of possible futures are things you dont need things you dont teach people in school. We need to be recognizing that there are mechanisms out there now that can give us those skills we need for free. And you are sure this is going to go ahead . To play devils advocate, is there not going to be a return . A lot of these things come and go in cycles. Robotics are great but in 10, 15 years, will people want a much simpler life . Possibly. We are seeing some people want to retreat to a simpler life but the pace of technological change is such that i think we are probably 20 to 25 years away before there is a major revolution. What we will see is a period where we dont catch up. We have technological unemployment but these new industries will kick in. We will go back to a fairly high level or possibly full employment. Thank you so much for joining us today. A bloomberg exclusive. Lys Prime Minister italys finance minister tells us he does not see the euro moving lower. Fornt ready to make a bid tmobile usa after arranging financing. Another exclusive. B as a viacomr bsky agrees to snap up the u. K. s channel five. Good morning to our viewers in europe, good evening to those in asia, and a very warm welcome to those just waking up in the u. S. I am guy johnson. Francine lacqua is off this hour. This is the pulse, live from bloombergs European Headquarters in london. What have we got for you . Thechurch of buffett, oracle of omaha has inspired thousands of investors. We sit down with one of his most faithful followers. Ever wonder how crisps get there flavor . Inside a lab where scientists create the best tasting snacks. That is just the appetizer, lets start with a bloomberg exclusive. Francine lacqua sat down with italys newly appointed finance minister. The nation is targeting growth of. 8 this year. Francine ask if this is a realistic goal. I hope we can do better than that. I think there are good reasons to think that we will have an upside surprise. Like what led by what . Support measures to low income families, support measures to companies, and a boost in confidence for investment and jobs. Whats your take on the deficit, does the European Union need to be more relaxed . The fiscal position in italy is extremely stable and aligned with targets. Our nominal deficit is expected to be 2. 6 this year and declining next year. Next year, we will achieve structural budget balance in practice. The debt will start declining next year and will continue to do so. I am perfectly i would like to state and restate that the italian fiscal position is under control. If i may add, figures look better in italy than other countries. Is there a danger that because markets have gone up a lot and there is a lot of conscience in the market that there is not the third check from the markets on european politicians . Benignets are now very visavis Investment Opportunities in the eurozone, including and especially the periphery. There is a risk of complacency. I would describe the situation a bit differently. There is a very favorable window of opportunity with growth resuming and with financial conditions easing and Market Opportunities increasing. Thisust strengthen opportunity by making growth more stable and job rich. Policy must do its part by and reducing by introducing Structural Reforms and making the budget balanced and more growth friendly. Italys Prime Minister pier padoan spaying with Francine Lacqua. More from him later. We have a theme today one of which is what is happening with the euro and the u. K. Arint is said to be planning bid to tmobile usa after meeting with banks after looking to the financing. Hans nichols is in berlin and in london as Matt Campbell. Hans, what are we looking at here . Is this going to happen next week on the next month, or over the next six months . Before we get a formal offer, this is the importance of this group. Our colleague in San Francisco said sprint executives are talking to bankers, making sure they have financing lined up. That is only one component of the story. They still need regular Regulatory Approval from the fcc and washington. You should reposition yourself as a telecommunications lobbyist and washington, d. C. They will have this deal and Time Warner Cable all these deals. Tried to buyt t tmobile u. S. , it was scuttled by the sec. The fcc. They need the approval from u. S. Regulators. That can take a long time. Point you have been making all morning. The financing is great and we need to understand how the financing is going to work. This is a regulatory story, this is a finance story. One of the funny things about the mobile deals, competition law is pretty arcane. When it comes to mobile telecoms it is pretty simple. Most companies have for operators. Mergers tend to be offered that would take that number down to three and regulators typically think three is too few. Get around how you that fundamental issue at the department of justice and the fcc take the view that four is the right number. There is no compromise, four or not. It is quite straightforward. Get this through you have to make an argument that the paradigm of wanting four players is wrong. One of the arguments as the landscape is changing, there are new competitors and the carriers need to be bigger to stand up to the googles and the apples of the world, who are the disruptive force. It will be interesting to see what arguments softbank and sprint try to deploy. At t that went wrong. There were a lot of highly paid lawyers and lobbyists who got that wrong. There are some lessons to be learned. Hans, and a sense of who is going to run this operation were able to go through . If the math works out, john , current ceo of tmobile. S. Sprint and Deutsche Telekom are in discussions according to the is a and mr. Legere leading candidate. He will be on bloomberg tv later and maybe we can pose questions to him. I am sure those questions will be asked. Who is the guy that used to run orange . They like Leather Jackets. Theme. Oming a lets come back to the financing. The regulatory story is front and center. At softbank, they like to be aggressive but financing raise a lothad to of money to take over sprint. Anytime there is an m a room or anywhere in the world, is almost bankers just throw in softbank. There is something to that. Masayoshi son is a hyper ambitious guy, who will talk very openly about wanting to make these huge deals. Heerage is a problem and even he is not immune to the laws of financial gravity. Is not ang to say this doable transaction but it is a bit of a stretch and you would see them take a pause from dealmaking after this if it goes through. Hans, do the germans feel anything ill towards tmobile usa . Do they have a connection or is it something they see as theres . This is a german asset being sold in the states . Not a great deal. The territorial proprietary feeling on it. Iteyou want to inc industrial fervor, you can talk siemens and ge. On the issue of tw did not see much of that happening when at t was going to acquire it. Maybe i am reading the wrong papers but i do not pick up any National Pride of loss of an asset to ann bank run out of asia. After the last few days, anding about alstom n siemens, interesting that not all of those deals fit into that mold. Matt campbell in the studio and hans nichols in berlin. A great conversation a little later. John legere is going to be joining us, ceo of that business and the front runner. 6 00 p. M. U. K. Time. I want to see what he is wearing, a tshirt and a Leather Jacket or a tie and a collar . For more from telecoms to television, bskyb rallying. Ryan chilcote has been watching this as the tv landscape changes. Lets talk about subscriber numbers. He big ms. Is that sky the big news is that skytv added customers, defying competition. Expectationsg the from some pretty bearish analysts who thought that what we were going to hear this morning from bskyb was that they had lost tv customers in the first three months of the errors. If you think about it, bet just spent 1. 5 billion buying rights 38champion lateague games and premier league games in 2012. Them a runill giving for their money. The other take away is the importance of content. Bskyb has done a multiyear Licensing Agreement with paramount pictures, which gave us anchorman and other movies. That shows you how important content is. Distribution is still important and you have got to have that. Viacom, we learned yesterday, it to the guardian thisd to by channel 5 in country. A lot of people are talking about with the internet is less of a problem. Is stillal television important as an avenue to reach people throughout the country. An interesting day. Just proving that content is king but distribution is not unimportant. You very much indeed. Ryan chilcote on the latest in the media sector. More on that in a little dinner. You cannot always get what you want. India italys finance minister does not expect a weaker euro anytime soon. The exclusive interview, after this break. Welcome back. G, youre watching the pulse. Lets look at the currency markets. The pound cable. Let me show you what is happening. On the cable rate. Better than anticipated data coming out of the u. K. On the manufacturing side. Pmi date of this morning for april telling us that the recovery is getting a little bit more balanced, or that is the spin they will put on it. Manufacturing data undoubtedly better. Will this change the view visavis carneys Interest Rate decision . Europe is closed today. Lets continue the conversation about what is happening in europe and get the views of italys finance minister. He told Francine Lacqua he would welcome depreciation of the currency but does not see it happening anytime soon. Mario draghi has taken off the table the risk of a breakup of the euro zone. This benefits all euros in numbers, including italy. Andpe and italy are growing exiting the recession. The task and challenge for italy is to make the growth, which is still fragile, more consolidated and resilient over the immediate term. This is where italian policy comes in. Ande now launching a broad ambitious structural reform program, including labor market reform and institutional reform. As well as measures to boost the economy in the short term. So that we strengthen the recovery and we make it more sustainable over the mediumterm and especially more job rituals to more job rituals. Any concerns about italian banks. There are stress tests, they need to be credible. Will they be credible and will italian banks pass . The comprehensive assessment needs to the credible. This is the need all banks face. We need to be convinced that the battalion and the european Financial Systems have been repaired. Letar as an italian banks, me know that italy has gone through two years of very deep recession in spite of that, italian bangs have proved to be highly resilient. There are nonperforming loans but banks are rebuilding their capital and i am convinced that in a short time there will be normal conditions prepared to loan to the economy and to support growth. There seems to be a lot more open talk from france that we need a lower euro. The lower euro would help european economy and be more in line with fundamentals. And would take off some of the pressure towards inflation in europe. However, one thing to think that a lower euro is useful. The other thing is to think we can target the euro. This is not something i see as possible. Do you think about currencies, how do you explain the fact that the euro has been so high . If the fed starts this program of less accommodative monetary policy, is it a subsequent is it a consequence that the dollar should go up . We forget one fundamental element. That recently they eurozone has turned into a large current account surplus situation. So that adds to the strength of the euro. The fundamental variables driving currencies have to do with growth and in this case higher growth in the u. S. Would suggest a higher dollar rather than the euro. Why is that not happening . This is a bit of a puzzle. Are no obvious reasons to see a strong depreciation of the euro coming up. As i said, i would really welcome a softer euro, a lower euro. This is different from the Exchange Dynamics in the short term. Morelower euro would be inline with the fundamentals. Interesting quote there from the interview francine day. Italysw with finance minister. Our next guest said the eu has an identity crisis. Roger is managing director of Capital Economics and author of a new book, the trouble with your. The trouble with europe. Aying it would nice to have lower europe and we need to get the economy back on track. The relationship with vicki you at the moment is stretched, difficult. With the euionship at the moment is stretched, difficult. Some people say that u. K. Should not be part of the eu. Can i make the same argument for italy or spain . With a be better off out . It is possible. The first best thing we should be aiming for is to reform the eu. We are going to need some sort of common european association. It would be better if we reform the eu so that it serves our purpose is better. There is a question mark about how one is likely to succeed. The barriers in front of fundamental reform are quite strong. I am trying to broaden this out. Would really benefit as much as spain or the u. K. From that reform . Served bye be better that reform . Arguably they could benefit as much as the u. K. Lets be clear, not everything that is wrong in europe is down to the eu. You talk about italy and spain. In those cases, a lot of what they are suffering from our selfinflicted wounds. If the eu broke up or came out, they would have to do something fundamental to reform their own economies. Lets talk about the reform process. If you were to handicap it and you talked about the likelihood of being able to reform the eu to the level of which the u. K. Happy,al area would be what is the chance of that happening customer the political elite is one thing and the british people are another. We do not know whether they will be asked for a referendum. For a straight question, what are the chances of getting the eu reformed in such a way that the British Public would vote to stay in, i dont think the chances are high. We really have to try. Be astorming out would terrible thing. It would color relations and we need to be friends with these countries and have close trading relationships. I could be wrong, maybe what is going to happen is that in trying to reform the eu britain is going to be more successful than many people suspect. The next step is the british exit from the eu. You have talked about this in the past. The big unknown, the unknown that peopleomething talk about the idea we are going to have a Good Relationship with the rest of the eu and it is not going to change much. That is the bit that i do not get my arms around. That is the unknown that is the biggest risk. We talk about the upside and we talk about the potential of benefit for the u. K. But we do not fully understand the risks and we cannot quantify them. About the risk. Qualification is difficult, we do not know how the rest of the eu would react. There are some clear things to guide us. First, the u. K. Is the rest of the eus single biggest export market. Not many people realize that. Bigger than the u. S. We to leave the eu, it is possible that you could say we do not like those nasty b rits, we will cut them out of our markets. They will try to put on punishing measures to stop us having access. For a start, that would be illegal to the wto. It would not be in their own interests from a trade that with britain would be against their interest. Very quickly, the other thing we do not understand is that they can change the rules and we would not have any influence. Have muchthat we influence anyway. If britain left the eu we would be in the same position as india and china and singapore and hong kong and america. I dont seem to see that they have much difficulty and exporting to the eu and they do not have any meps or seats on these councils. I see. Roger, author of the trouble of your. Time for todays pulse number. 100,000, how many people from trade unions are marching in moscows red square. It is may day, the first time the parade has been held there since 1991, the year the soviet union was dissolved. And a few lessle missiles. That may show you some pictures of athens, a mayday celebration there. Good morning, everybody. Youre watching the pulse, live from the European Headquarters in london. I am guy johnson. These are the Bloomberg Top headlines. The ins has approved a 17 billion loan for ukraine, that will be extended over two years and help ukraines budget needs and open the country for further aid from other countries. The imf director Christine Lagarde said now is the time to act to keep ukraine from sinking further. Opportunity toan seize the moment to break away from previous practices. Both from a fiscal, monetary, and from a governance point of view. Chinas Manufacturing Sector grew less than estimated in april. The latest pmi data came in at 50 point four percent, versus a thean estimate of 15. 5 latest pmi data came in at 50. 4 versus a median estimate of 50. 5. Numbers above 50 signal expansion. The set will continue to scale back stimulus as the u. S. Economy recovers. On track to and asset purchases by the end of the year. Interest rates will remain close to zero for a considerable period of time. Breaking news from the u. K. I take you now to the financial district of london. The metropolitan police have identified a package outside 1 churchill place in canary wharf as suspicious. Make you aware when we get more information. Remember there was a bomb in that part of town quite a long time ago. Security is always tight in that part of london. Lets talk about how the markets are trading. London is open for business. Many markets are not, it is mayday. 10 minutes cranny. Is marching ahead in terms of exports. You should never give me new things to work with. In909, an overall pattern terms of the spike higher. The purchasing Managers Index coming in way ahead and exports are rising. There is a more important move in dollarsterling. The levels since 2009. The dollar has drifted a little lower this morning. 1. 3884 of the eurodollar trade. The feds assumption in terms of what is happening, how that is going to play out in terms of the dollar currency, we will wait to see more detail today. You will get jobless numbers in the u. S. Number 320,000 is the number we are looking for. As be futures at 1879. 5. Personal spending is what the market will be consumed with. As well as the purchasing Managers Index. The u. K. Open, lets have a look at a couple of the stocks on the move. Hone, lloydsvodap is doing better in terms of margins. Bskyb and paramount pictures. Profits rise by 90 , taking in more funds under management. Look forward to that conversation. Our markets editor manus cranny. In 25 minutes, it is surveillance with tom keene. You have the very wellpaid sir martin sorrell. Has a bang up year. We will speak with sir martin about the success that is your economy, the u. K. Economy and what the u. S. Can learn from the u. K. Best practices. We will touch on income inequality. Martin sorrell, the certitude that facebook and twitter and google alone the advertising world. A lot more going on, particularly the idea of ukraine relinquishing eastern ukraine. On the banks, brown hands from hintzd bernstein brad from Sanford Bernstein on Credit Suisse and bnp paribas. Asked about what is happening in the media landscape visavis the u. K. , a big takeover viacom stepping in and snapping up one of the u. K. s biggest properties, channel 5. Destruction. Tive drew madison and giuliana manual will join us from ubs. Their optimism of the markets and the American Economy. Looking forward to it, thank you very much. Tom keene with surveillance shortly. A big morning for bloomberg exclusives. They are moving closer to winning marks consumer business after Reckitt Benckiser walked away from talks. Hans nichols is in berlin. Reckitt. The number that pushed too high. Reckitt was offering all caps, that is the difference between the deal between bayer and merck and reckitt and merck. Swap,was an asset trading Animal Health for the Consumer Health unit at merck. It got too expensive, heres a quote from the ceo of reckitt, we are a highly disciplined acquirer with strict metrics. It is like you are in a bizarre and you are negotiating for something and you walk away. Makes it more likely that the bayermerck swap will go through, bayer gets Consumer Health aspects. They have claritin, coppertone. It will allow bayer to be more tightly focused in their core strengths, Consumer Health. And not the animal aspect. Yeah. s one of theiser biggest mergers anyway. Walk me through the merckbayer relationship, what is it going to look like . This is not a done deal. They are just now, bayer is the front runner for this. You would be trading assets. Has strengths in the Consumer Health unit. Less so in the health unit. They would swap it over. Merck would get that and you have companies that are more focused. That has been the story taking place in all these pharmaceutical asset swaps, mergers, buyouts, however you talk about it. We have cash and assets. That is what this deal would be about. If it is just cash, a got too expensive and one of the other suitors walked away. Thank you very much indeed hans nichols. Update on a story i broke to you a few minutes ago, package incious canary wharf. Police say it is a false alarm, a controlled explosion. Moving on to other corporate stories. Lloyds bank releasing figures, delivering a 22 rise in quarterly profits. Manus cranny has been working his way through the numbers all morning. What numbers should i look at customer 57 increments. 57 impairments. Feature in this particular set of results. Which brings me to the ceos, that he is running a low risk business. The balance about sheet. Impairments down 57 , costs down 5 and the amount of money they earn from what they land is rising. Those are the three messages. Osorio the ceo horta saying he will detail a three year plan next year. Anthony jenkins of barclays will detail his plan next week, rbs delivers their numbers tomorrow. There are two institutions that have large footprints in investment banking. Lloyds does not have that. It is much cleaner and easier to understand. The majority of their business is done in mortgages. The other thing you have got to think about is the stress test the uks going to implement. There is a pretty stringent stress test. A 35 drop in u. K. Property prices. The european metric is 19 . The interesting number the stress test is 4 . That is the number the regulators are going to use with a stress test the u. K. Banks. Longtermlow the average Interest Rate in the u. K. Lets flash those issues at the bottom. The three year plan, not expecting to reduce u. K. Branches. Theyre going to have a share sale of tsb. That is a Branch Network in the u. K. , 600 branches, to comply with european regulations. Thing is this, the government has been selling holdings in lloyds, over 7 billion pounds worth. They are getting unshackled and are going to be able to be asked to be allowed to pay defense. Pay dividends. Lloyds will probably in the second half of the year be the ftsealent of 5 , above the level in terms of event yield. Dividend yield. Thank you. Sky rises above competition. Bskyb and the digital revolution, that is coming up after this break. Good morning. Youre watching the pulse, live from london on bloomberg television. Lets talk about what is happening in the media space. Shares of bskyb climbing. S rising due to a boost in subscriptions. Bskyb preparing an overhaul of its settop box technology. Amazon and apple are coming out bt, theogle and Competitive Landscape is getting fiercer and fiercer. Lets figure out what is going to happen next. European telecoms analyst at bloomberg industries, good morning. The first thing that struck me is they have the subscriber number that looks great when you look at it. But they have new products calle nowtv, and overthetop box you plug into your broadband. Are they being disingenuous when they publish this number without those traditional settop box . They started employing this seeod, you can no longer the paytv subscriptions and understand how the pressure affectingm bt is paytv. Paytv is still the most important product for the revenue generation. Nevertheless, if you look at the figures, that was the tv subscriptions that were higher than expected at 74,000. Pressure onwe see traditional paytv, the market took that as good news and we see shares going up. Broadband is under pressure. This was a big player they have been pushing out. Bt watching tv services to drive broadband, sky is suffering. That continues to be the case. Bt is investing not only in broadband but also supporting its product with sport rights. That pressure will continue. Are they are doing is they testing their own Fiber Network rollout in york. They are trying to provide standalone broadband product. They are trying to hold onto their market share. Bt is getting their largest market share in that. The world is getting so much more complicated and ferociously competitive for a company like sky. You look at what is happening with netflix and what is happening with the overthetop product mix amazon is pushing. And you have news that viacom is potentially going to be buying channel 5. A more traditional broadcaster but nevertheless, upping the ante. New programming over from the states driving that further forward. Lights going to get difficult. House guy is trying to handle this, broadening their product range. Trying to monetize content. Previously it was only a 20 pound basic paytv subscription. Now you can get now tv, ondemand. By introducing different products at different price levels, they are trying to address a larger base of customers. Will that be successful . It might be successful, sky is the dominant paytv operator and they also hold significantly content rights when it comes to nonsport programming, such as major programming. As long as they can hold on, they might retain competitive adventure and stave off competition. It is content that is critical. Do they need to spend more and more on content . Is that going to be the battle . Theyre going to have to spend more and more. The trend looks like that, especially in the sports arena. We see inflation with sports rights. The next auction we will definitely see a significant increase in the cost. Lets look at historically, the programming costs were always in line with revenue. As much as they grew their revenues, they invested a similar amount in programming costs. Theyas they have will be investing in programming content. Joining us from bloomberg industries. Let us move on with company news for you. Fashion designer dolce and been sentenced to 18 months in jail for tax evasion. A core shortened the sentence. They will appeal the ruling at italys top court. Alibaba in talks to regain their stake in a paypal like unit. This could increase their valuation, head of the ipo slated for later this year. Would givealipay alibaba exposer to chinas market. With spacey set down charlie rose and they spoke about what goes into making the hit series. Is so much fun because i am heavily involved in it. I feel that we all grapple with it and we talk about it and discuss it. Says your ideae is terrible but it led me to this idea. There is this remarkable journey that we are all on. The funnest part about it is there are so many people i do not know about frances. With charlieview rose a little later today, 8 00. M. New york time 10 00 p. M. U. K. And we will broadcast at a different time. Get chips, how we crisps, to get their flavor . We take you inside a never before seen lap where a team of scientists were to create the best tasting snacks. Bloomberg sits down with pepsicos ceo. It is going to be on in the loop later on. Back. D morning, welcome youre watching the pulse. Lets talk about snack foods. Have you ever wondered how crisps, chips, get their flavor . Betty liu takes us inside and never before seen pepsico lab where scientists create the perfect taste. Thehe definition is blending of very arts with. Science the blending of foodinary arts with science and technology. Windows get evaluated, is a team food scientists, executives, and consumers tasting what we identified as the Gold Standard. Explain what the Gold Standard is. It is a target of what you want the final execution to be. The final product should match this old standard flavor. This is a perfect transition to the cheesy garlic bread. What chooses this . What cheese is this. Parmesan, mozzarella, cheddar, gouda. Garlic, blackeet pepper. Of culinary Gold Standard the final experience. What happens once the additional easier to once the dish leaves your kitchen. They come back and reevaluate it as a group. How do you know if you have got it . When you taste the chip, the flavors are identical but the experience and the memotions identical. Our we do not want to share a potato ship with seasoning. Tos has the right elements give you a dynamic multiflavored experience. At the same time it lets you feel like you are eating garlic bread. I will try the ship. Similar. I hope so. Great reminder that pepsicos ceo will be joining betty later on on in the loop. A great conversation, do not miss it. Talking of things that are happening today, its new to the currency market. It is may day, markets are a little quieter than normal. The pound is purring. Better than expected manufacturing data. Lets talk about the rest of the day. Labor day. Our International Correspondent is here. Angela merkel not in berlin, she is in d. C. D. C. E will be landing in later today, she first meets a group of senators. Look for senators to pressure Angela Merkel on how you pressure Vladimir Putin on ukraine. It is going to dominate the discussion. She meets with obama tomorrow and then Christine Lagarde. Willis merkel and obama, they make nice after some difficult relationships over the nsa allegations, tapping of her personal phone. Which network do you think the merkel phone uses in the u. S. . You have got to go with tmobile, 60 owned by Deutsche Telekom. We will watch to see but happens at the open, stocks are not trading here today but we will see what happens with tmobile and sprint. An interview later on on bloomberg west with john legere, president and ceo of tmobile. Maybe we can press him on whether or not he wants the job of a merged company, sprint and tmobile. Thank you very much indeed, hans nichols. It for the pulse, we will be back tomorrow. Now it is surveillance. Kieve east slips away from and whats left of ukraine. The dow surges to record highs as the American Economy appears flat on its back. Ise case for thetech bulls all about sales growth . Ambergs is surveillance. It is thursday, may 1. It is bloomberg surveillance. We need to get to a brief this morning. Brief presented briefly. The world,ta around u. K. Manufacturing is stronger than expected. In the u. S. , 8 30 a. M. We got the week list jobless claims. They correlate with the s p 500. At 9 45 a. M. , weve got consumer thatrt and u. S. Pmi and 10 00, weve got the ism. Why do you look at vehicle sales . E its a proxy on