FT : Rise in voice calls puts UK telecoms networks under strain

Rise in voice calls puts UK telecoms networks under strain
Ministers seek reassurance that system can cope with increase in demand linked to virus outbreak


A surge of up to 50 per cent in the number of phone calls being made over mobile and landline networks has put Britain’s telephone system under significant strain and led ministers to call for industry action to improve coverage of voice services. 

The rise in voice calls has led to issues of call quality, dropped calls and a major outage last week.

The issue was discussed on a conference call between Melanie Dawes, Ofcom’s chief executive; Oliver Dowden, the culture secretary; Matt Warman, the minister for digital infrastructure; and industry leaders on Friday as politicians called for reassurance that networks can handle a dramatic rise in communications use. 

The capacity of broadband networks to handle a huge increase in traffic generated by millions of people working from home because of the coronavirus outbreak has been tested in recent days and led to Netflix and YouTube agreeing to lower the capacity demands of their streaming services. 

The release of a new game in the Doom franchise on Friday was the latest stress point for networks that remain confident that broadband capacity is sufficient to meet the needs of millions of people working from home at the same time that children are off school using online learning materials or streaming films or games. 

Yet it is voice calls that have caused the most teething problems in relocating the working population from urban centres to residential areas.

The number of mobile phone calls being made by homebound workers overloaded the system that connects phone messages between different mobile networks last Tuesday and triggered a bout of industry finger pointing over who was to blame. That issue was resolved quickly but voice call quality remained poor over the course of the week. 

The number of phone calls made over the O2 mobile network surged 50 per cent that day which was the equivalent to seven years of growth in one day. It saw 160m calls lasting an average seven minutes, 40 per cent longer than normal.

BT has said that its EE network can deal with the rise in the number of phone calls being made but has now urged phone users to revert to landlines or internet-based services like Skype for longer calls. 

Dean Bubley, the founder of advisory firm Disruptive Analysis, said that the changing patterns of consumer behaviour had meant that old mobile networks were having a “rough ride”.

“The good old fashioned phone call seems to have made a comeback and everyone is calling their [metaphorical] granny who may have a 3G phone that doesn’t run over the WiFi,” he said of the capacity crunch. Mobile networks are also configured to handle huge amounts of traffic in areas like central London rather than a row of terraced houses in the home counties. 

Enrique Blanco, chief technology officer of Telefónica which owns O2 in the UK, said that Spain faced a similar situation when it was hit by the pandemic, and workers and schoolchildren were sent home.

Mobile voice traffic immediately rose between 40 and 45 per cent, he said, while fixed-line calls surged 30 per cent. That has been replicated in other markets, including Germany and the UK. 

>>> Europe : Brokers Upgrades & Downgrades - 23rd of March 2020 V2(+)

>>> Up
* AB InBev Raised to Equal-Weight at Barclays; PT 48 euros
* ALK-Abello Raised to Buy at ABG; PT 1,710 kroner
* Anglo American Raised to Buy at Renaissance Capital
* BMW Raised to Overweight at JPMorgan; PT 50 euros
* Boeing Raised to Buy at Goldman; PT $173
* Bonduelle Raised to Buy at Portzamparc
* Bunzl Raised to Equal-Weight at Morgan Stanley
* Burford Capital Raised to Buy at Berenberg
* Castellum Raised to Hold at SEB Equities; PT 170 kronor
* C&C Raised to Equal-Weight at Barclays; PT 170 pence
* Domino's Pizza Group Raised to Hold at Berenberg; PT 250 pence
* DWS Raised to Buy at Jefferies; PT 28 euros
* Flutter Raised to Hold at HSBC; PT 6,800 pence
* Fuchs Petrolub Raised to Hold at M.M. Warburg; PT 33.75 euros (+)
* GEA Group Raised to Buy at HSBC; PT 21 euros
* Hella Raised to Overweight at JPMorgan; PT 32 euros
* IHG LN Raised to Equal-Weight at Morgan Stanley; PT 2,800 pence
* ISS Raised to Buy at Danske Bank Markets; PT 100 kroner (+)
* Magnit GDRs Raised to Buy at Goldman; PT $11.40
* Moneysupermarket Raised to Overweight at Barclays; PT 310 pence
* Mycronic Raised to Buy at Handelsbanken; PT 169 kronor
* Nexi Raised to Buy at Banca Akros (ESN); PT 13 euros (+)
* Pearson Raised to Equal-Weight at Barclays; PT 540 pence
* Plus500 Raised to Buy at Berenberg; PT 860 pence
* Publicis Raised to Overweight at Barclays; PT 35 euros
* Rathbone Brothers Raised to Hold at Jefferies; PT 1,430 pence
* Rheinmetall Raised to Buy at HSBC; PT 86 euros
* Salzgitter Raised to Hold at Jefferies; PT 10 euros
* Sanne Group Raised to Buy at Liberum; PT 630 pence (+)
* SES GDRs Raised to Overweight at Barclays; PT 7.15 euros
* Siltronic Raised to Hold at Berenberg; PT 63 euros
* Sixt Leasing Raised to Buy at Commerzbank; PT 19.50 euros (+)
* Telia Raised to Buy at DNB Markets; PT 40 kronor (+)
* Vetropack Raised to Buy at Baader Helvea; PT 3,100 Swiss francs
* X5 Retail GDRs Raised to Buy at Goldman; PT $32
* Yara Raised to Buy at Arctic Securities; PT 400 kroner
* Zooplus Raised to Buy at Berenberg; PT 136 euros
* Zur Rose Raised to Buy at Baader Helvea; PT 165 Swiss francs

>>> Down
* BBVA Cut to Neutral at Alantra Equities; PT 4 euros
* Bertrandt PT Cut to 30 euros from 52 euros at M.M. Warburg (+)
* IAG PT Cut to 3.50 euros from 8.20 euros at Oddo BHF (+)
* Datalogic Cut to Neutral at Banca Akros (ESN); PT 10.50 euros (+)
* DCC Cut to Equal-Weight at Morgan Stanley
* Galp Cut to Add at AlphaValue
* Hugo Boss PT Cut to 55 euros from 75 euros at M.M. Warburg (+)
* ING Cut to Sell at AlphaValue
* ISS PT Cut to 80 kroner from 100 kroner at Jefferies
* Kerry Group Cut to Sell at Goldman; PT 93 euros
* Lufthansa Cut to Sell at AlphaValue
* Munich Re PT Cut to 219 euros at Bankhaus Metzler (+)
* Petra Diamonds Cut to Market Perform at BMO
* Polar Capital Cut to Hold at Shore Capital
* Schoeller-Bleckmann PT Cut to 30 euros at Deutsche Bank (+)
* SEB Cut to Reduce at AlphaValue
* Weir Cut to Hold at Deutsche Bank; PT 950 pence

>>> Initiation


>>> Call
* Burford Upgraded at Berenberg; Shares Have ‘Fallen Too Far’ (+)
* IHG Raised at Morgan Stanley on Liquidity, Covenant Headroom
* KBC Unable to Make Correct Assessment of Belgian Govt Measures
* Swedbank Probe Unearths $40 Billion of ‘High Risk’ Transactions

>>> Europe : Brokers Upgrades & Downgrades - 23rd of March 2020 V2(+)

>>> Up
* AB InBev Raised to Equal-Weight at Barclays; PT 48 euros
* ALK-Abello Raised to Buy at ABG; PT 1,710 kroner
* Anglo American Raised to Buy at Renaissance Capital
* BMW Raised to Overweight at JPMorgan; PT 50 euros
* Boeing Raised to Buy at Goldman; PT $173
* Bonduelle Raised to Buy at Portzamparc
* Bunzl Raised to Equal-Weight at Morgan Stanley
* Burford Capital Raised to Buy at Berenberg
* Castellum Raised to Hold at SEB Equities; PT 170 kronor
* C&C Raised to Equal-Weight at Barclays; PT 170 pence
* Domino's Pizza Group Raised to Hold at Berenberg; PT 250 pence
* DWS Raised to Buy at Jefferies; PT 28 euros
* Flutter Raised to Hold at HSBC; PT 6,800 pence
* GEA Group Raised to Buy at HSBC; PT 21 euros
* Hella Raised to Overweight at JPMorgan; PT 32 euros
* IHG LN Raised to Equal-Weight at Morgan Stanley; PT 2,800 pence
* ISS Raised to Buy at Danske Bank Markets; PT 100 kroner (+)
* Magnit GDRs Raised to Buy at Goldman; PT $11.40
* Moneysupermarket Raised to Overweight at Barclays; PT 310 pence
* Mycronic Raised to Buy at Handelsbanken; PT 169 kronor
* Nexi Raised to Buy at Banca Akros (ESN); PT 13 euros (+)
* Pearson Raised to Equal-Weight at Barclays; PT 540 pence
* Plus500 Raised to Buy at Berenberg; PT 860 pence
* Publicis Raised to Overweight at Barclays; PT 35 euros
* Rathbone Brothers Raised to Hold at Jefferies; PT 1,430 pence
* Rheinmetall Raised to Buy at HSBC; PT 86 euros
* Salzgitter Raised to Hold at Jefferies; PT 10 euros
* SES GDRs Raised to Overweight at Barclays; PT 7.15 euros
* Siltronic Raised to Hold at Berenberg; PT 63 euros
* Sixt Leasing Raised to Buy at Commerzbank; PT 19.50 euros (+)
* Telia Raised to Buy at DNB Markets; PT 40 kronor (+)
* Vetropack Raised to Buy at Baader Helvea; PT 3,100 Swiss francs
* X5 Retail GDRs Raised to Buy at Goldman; PT $32
* Yara Raised to Buy at Arctic Securities; PT 400 kroner
* Zooplus Raised to Buy at Berenberg; PT 136 euros
* Zur Rose Raised to Buy at Baader Helvea; PT 165 Swiss francs

>>> Down
* BBVA Cut to Neutral at Alantra Equities; PT 4 euros
* Bertrandt PT Cut to 30 euros from 52 euros at M.M. Warburg (+)
* IAG PT Cut to 3.50 euros from 8.20 euros at Oddo BHF (+)
* Datalogic Cut to Neutral at Banca Akros (ESN); PT 10.50 euros (+)
* DCC Cut to Equal-Weight at Morgan Stanley
* Galp Cut to Add at AlphaValue
* Hugo Boss PT Cut to 55 euros from 75 euros at M.M. Warburg (+)
* ING Cut to Sell at AlphaValue
* ISS PT Cut to 80 kroner from 100 kroner at Jefferies
* Kerry Group Cut to Sell at Goldman; PT 93 euros
* Lufthansa Cut to Sell at AlphaValue
* Munich Re PT Cut to 219 euros at Bankhaus Metzler (+)
* Petra Diamonds Cut to Market Perform at BMO
* Polar Capital Cut to Hold at Shore Capital
* Schoeller-Bleckmann PT Cut to 30 euros at Deutsche Bank (+)
* SEB Cut to Reduce at AlphaValue
* Weir Cut to Hold at Deutsche Bank; PT 950 pence

>>> Initiation


>>> Call
* Burford Upgraded at Berenberg; Shares Have ‘Fallen Too Far’ (+)
* IHG Raised at Morgan Stanley on Liquidity, Covenant Headroom
* KBC Unable to Make Correct Assessment of Belgian Govt Measures
* Swedbank Probe Unearths $40 Billion of ‘High Risk’ Transactions

>>> Stoxx 600 PRe-MArkt Indications

  • HelloFresh (HFG TH) +3.5%
  • Norsk Hydro (NOH1 TH) +2.4%
  • IAG (INR TH) +1.9%
  • AMS (DQW1 TH) +1%
  • BAT (BMT TH) +0.8%
  • Imperial Brands (ITB TH) +0.8%
  • Mowi (PND TH) +0.7%
  • CTS Eventim (EVD TH) +0.4%
  • Fraport (FRA TH) +0.2%
  • OMV (OMV TH) +0.2%
  • Safran (SEJ1 TH) -6.8%
  • Kering (PPX TH) -6.8%
    • Kering Contributes to the Fight Against COVID-19
  • Suez (SZ1 TH) -7.2%
  • Galapagos (GXE TH) -7.4%
  • 3i (IGQ5 TH) -7.7%
  • EasyJet (EJT1 TH) -7.7%
    • EasyJet to Shutter at least 90% of Capacity From Next Week
    • U.K. Airline Bailout in Flux With Range of Steps Under Review
  • ASML (ASME TH) -8.4%
    • Shielded from Pandemic, Work Continues in World’s Cleanest Room
  • Siemens Gamesa (GTQ1 TH) -8.9%
  • Aena (A44 TH) -8.9%
  • RELX (RDEB TH) -9.1%

>>> TradeGate Pre-Market Indications

DAX:
  • Lufthansa (LHA TH) -1.3%
  • Bayer (BAYN TH) -1.9%
  • E.On (EOAN TH) -2%
  • Vonovia (VNA TH) -2.1%
  • Henkel (HEN3 TH) -2.1%
  • Covestro (1COV TH) -4.3%
  • Munich Re (MUV2 TH) -4.3%
  • Adidas (ADS TH) -4.5%
  • BMW (BMW TH) -4.5%
    • BMW Raised to Overweight at JPMorgan; PT 50 euros
  • MTU Aero (MTX TH) -4.6%
    • MTU Aero Suspends Some Operations as Supplies Interrupted
MDAX:
  • HelloFresh (HFG TH) +4.2%
  • Fraport (FRA TH) +1.3%
  • Siemens Healthineers (SHL TH) +1.2%
  • CTS Eventim (EVD TH) +0.8%
  • Sartorius (SRT3 TH) +0.5%
  • Aurubis (NDA TH) -5.2%
  • Brenntag (BNR TH) -5.3%
  • Varta (VAR1 TH) -6.2%
  • Lanxess (LXS TH) -6.2%
  • Telefonica Deutschland (O2D TH) -6.4%
SDAX:
  • Dermapharm (DMP TH) +7.3%
  • Ceconomy (MEO TH) +3.6%
  • Draegerwerk (DRW3 TH) +2.7%
  • Wacker Chemie (WCH TH) +2.2%
  • Adler Real Estate (ADL TH) +2.1%
  • Deutsche Euroshop (DEQ TH) -5.3%
  • DIC Asset (DIC TH) -5.7%
  • Wacker Neuson (WAC TH) -6%
  • Borussia Dortmund (BVB TH) -7%
  • Kloeckner (KCO TH) -8.9%

>>> Europe : Brokers Upgrades & Downgrades - 23rd of March 2020

>>> Up
* AB InBev Raised to Equal-Weight at Barclays; PT 48 euros
* ALK-Abello Raised to Buy at ABG; PT 1,710 kroner
* Anglo American Raised to Buy at Renaissance Capital
* BMW Raised to Overweight at JPMorgan; PT 50 euros
* Boeing Raised to Buy at Goldman; PT $173
* Bunzl Raised to Equal-Weight at Morgan Stanley
* Burford Capital Raised to Buy at Berenberg
* Castellum Raised to Hold at SEB Equities; PT 170 kronor
* C&C Raised to Equal-Weight at Barclays; PT 170 pence
* Domino's Pizza Group Raised to Hold at Berenberg; PT 250 pence
* DWS Raised to Buy at Jefferies; PT 28 euros
* Flutter Raised to Hold at HSBC; PT 6,800 pence
* GEA Group Raised to Buy at HSBC; PT 21 euros
* Hella Raised to Overweight at JPMorgan; PT 32 euros
* IHG LN Raised to Equal-Weight at Morgan Stanley; PT 2,800 pence
* Magnit GDRs Raised to Buy at Goldman; PT $11.40
* Moneysupermarket Raised to Overweight at Barclays; PT 310 pence
* Mycronic Raised to Buy at Handelsbanken; PT 169 kronor
* Pearson Raised to Equal-Weight at Barclays; PT 540 pence
* Plus500 Raised to Buy at Berenberg; PT 860 pence
* Publicis Raised to Overweight at Barclays; PT 35 euros
* Rathbone Brothers Raised to Hold at Jefferies; PT 1,430 pence
* Rheinmetall Raised to Buy at HSBC; PT 86 euros
* Salzgitter Raised to Hold at Jefferies; PT 10 euros
* SES GDRs Raised to Overweight at Barclays; PT 7.15 euros
* Siltronic Raised to Hold at Berenberg; PT 63 euros
* Vetropack Raised to Buy at Baader Helvea; PT 3,100 Swiss francs
* X5 Retail GDRs Raised to Buy at Goldman; PT $32
* Yara Raised to Buy at Arctic Securities; PT 400 kroner
* Zooplus Raised to Buy at Berenberg; PT 136 euros
* Zur Rose Raised to Buy at Baader Helvea; PT 165 Swiss francs

>>> Down
* BBVA Cut to Neutral at Alantra Equities; PT 4 euros
* DCC Cut to Equal-Weight at Morgan Stanley
* Galp Cut to Add at AlphaValue
* ING Cut to Sell at AlphaValue
* ISS PT Cut to 80 kroner from 100 kroner at Jefferies
* Kerry Group Cut to Sell at Goldman; PT 93 euros
* Lufthansa Cut to Sell at AlphaValue
* Petra Diamonds Cut to Market Perform at BMO
* SEB Cut to Reduce at AlphaValue
* Weir Cut to Hold at Deutsche Bank; PT 950 pence

>>> Initiation


>>> Call
* IHG Raised at Morgan Stanley on Liquidity, Covenant Headroom
* KBC Unable to Make Correct Assessment of Belgian Govt Measures
* Swedbank Probe Unearths $40 Billion of ‘High Risk’ Transactions

>>> What to look at today - 23rd of March 2020

U.S. and European equity futures tumbled along with equity futures after a surge in the global death toll from the coronavirus and a failure by Congress to agree on an aid plan.
S&P 500 futures dropped 5% and hit limit down early on, though came off its lows. European contracts fell more than 6% as leaders scrambled to enforce more restrictions on people’s movements. Stocks in Australia, South Korea and Hong Kong also slumped, while India tumbled more than 10%. The dollar fell against major peers after the Federal Reserve and counterparts introduced daily operations to provide dollars around the world. Treasuries gained and oil ticked higher after another crushing slide last week.

Nikkei +2.02% Hang Seng -4.10% CSI -2.52% Shanghai -2.16% Shenzen -3.04%

Eur$ 1.0759 CNH 7.1263 CNY 7.1022 JPY 109.79 GBP 1.1700 CHF 0.9812 TRY 6.5745 RUB 80.30 WTI$ 22.96 +1.4%

S&P -3,70% Nasdaq -3.11% EuroStoxx -4.47% FTE -4.74% Dax -4.31% SMI

Macro :
- Too Soon to Buy Risk Assets Say Credit Suisse, JPMorgan Asset
- Germany Expects GDP to Shrink by 5% This Year, Bild Says
- The Most Powerful USA Olympic Teams Want the Tokyo Games Moved
- Trump Says Virus Plan With $2 Trillion Impact Is ‘Very Close’
- Italy Shuts Down Almost All Industrial Production for 15 Days
- Goldman Sachs Props Up Own Money-Market Funds After Withdrawals
- Spain to Extend State of Emergency as Deaths Keep Rising
- Tens of Thousands Are Getting Laid Off in U.S. Shale
- D.E. Shaw Raises $2 Billion for Flagship Composite Hedge Fund
- Colony’s Barrack Says Commercial Mortgages on Brink of Collapse

Keep an eye on :
- AIR FP : Airbus Reports EU15b Credit Line, Pulls 2020 Guidance
- AIR FP : Airbus Plans to Reopen France, Spain Plants at Lower Output: FT
- AIR FP : Airbus Spending About $5.3 Billion a Month, Welt am Sonntag Says
- AIR FP : Airbus Pulls Outlook, Dividend to Bolster Funds in Pandemic
- ANTO LN : Antofagasta to Reduce Workers, Contractors to Slow Virus Spread
- ASY FP : Assystem Won’t Meet 2020 Objectives Due to Coronavirus
- BDT GY : Bertrandt AG Withdraws Forecast for FY 2019/2020 on Coronavirus
- BMW GY : BMW Poised to Idle Biggest Plant, With 11,000 U.S. Jobs on Line
- BORG SS : Björn Borg Withdraws Proposal for Shareholder Dividends
- BRE IM : Brembo Proposes to Suspend Dividend
- IAG LN : U.K. Mulls Plans to Bail Out Hardest-Hit Airlines, Companies: FT
- BT/A LN : BT Ready to Share Data That Tracks People’s Movement
- CERV IM : Cerved Halts Intrum Talks About Credit Unit Sale on Coronavirus
- CNHI NA : CNH Truck Unit May Face Brunt of European Virus Shutdown: React
- CNHI NA : CNH Industrial Names Chair Suzanne Heywood as Acting CEO
- DECB BB : Deceuninck to Scrap 2019 Dividend Proposal on Coronavirus
- DBAN GY : Deutsche Beteiligungs: Current Financial Year View Withdrawn
- DNB NO : DNB Cuts Rate on Home Mortgages by Up to 0.50ppt
- EZJ LN : EasyJet to Shutter at least 90% of Capacity From Next Week
- EQNR NO : Equinor Suspends Stock Buyback, Plans to Cost Cuts
- ENX FP : Euronext CEO Says Harmonized EU Approach to Short-Selling Urgent
- FRE GY : Roche Sues Fresenius to Block Copies of Cancer Drug Alecensa
- GFJ NO : Gjensidige Scraps Special Dividend; Maintains Regular Payout
- HOC LN : Hochschild Suspends Argentina Operation: Metal Disruption Update
- IBE SM : Iberdrola Plans to Sell Stake in German Wind Farm: Expansion
- ICAD FP : Icade Suspends 2020 Guidance Due to Coronavirus
- IGY GY : Innogy Full Year Adjusted Ebit Misses Lowest Estimate
- INTRUM SS : Cerved Halts Intrum Talks About Credit Unit Sale on Coronavirus
- BAER SW : Julius Baer Paid CEO Rickenbacher 4.41 Million Francs Last Year
- KBC BB : KBC Unable to Make Correct Assessment of Belgian Govt Measures
- KER FP : Balenciaga, Saint Laurent to Produce Masks in French Workshops
- KER FP : Kering Estimates 1Q Rev. Down 13% to 14% on Coronavirus
- KER FP : Kering Not Virus-Exempt Yet Gucci Seen in China Revival: React
- LEG GY : LEG Immobilien Suspends German Rent Increases on a Wide Scale
- MMT FP : M6 Postpones AGM, Defers Dividend Payment
- MTU GY : MTU Aero Suspends Some Operations as Supplies Interrupted
- NEL NO : Nel Temporarily Suspends Manufacturing at U.S. Plant
- NESTE FH : Neste Porvoo Refinery’s Turnaround 2020 to Be Delayed
- NESN SW : Nestle Secret Maggi Recipe Adds Show to Win in Emerging Markets
- NXI FP : Nexity Holds EU775m in Cash, Confirms Dividend Payment
- NOKIA FH : Nokia Says Financial Liquidity Is Good Amid Coronavirus
- NSKOG NO : Norske Skog’s Golbey PM2 Shut, Rest of Units Operating as Normal
- NOVN SW : Novartis to Donate Up to 130M Hydroxychloroquine Doses
- PSON LN : Pearson Says Performance is in Line With Expectations
- RNO FP : Renault Doesn’t Need Nationalization to Survive Virus: Chairman
- ROG SW : Roche Sues Fresenius to Block Copies of Cancer Drug Alecensa
- RYA ID : Ryanair CEO and Staff to Take 50% Pay Cut, FT Says
- SHOT SS : Scandic Needs Further SEK1b-1.5b of Financing This Year
- 9984 JP : SoftBank Soars After Unveiling $41 Billion Plan to Slash Debt
- SRAIL SW : Stadler Wins up to EU3b Tender from Berlin for Subway Cars
- SWEDA SS : Estonia in Talks With U.S. to Get Part of Any Swedbank Fine: SvD
- SWEDA SS : Swedbank Report Can’t Conclude That Laundering Actually Happened
- TEN IM : Oilfield Pipemaker Tenaris Cuts 223 Texas Jobs, State Says
- TFI FP : TF1 Suspends Objectives Announced in Feb. Due to Coronavirus
- TSLA US : Sharp Files Patent Infringement Lawsuits Against Tesla in Japan
- THULE SS : Thule Cancels Dividend on Coronavirus Concerns
- UBSG SW : UBS to Make Several Billion Swiss Francs Available for SMEs
- VK FP : Vallourec Suspends Guidance on Coronavirus, Oil Price Decline
- VAF PL : Vista Alegre Atlantis to Suspend Operations From March 23
- VOW3 GY : VW CEO Warns Factory Closures May Extend Longer Than Three Weeks
- VOW3 GY : Germany Asks Carmakers to Produce Medical Gear for Virus Fight

WSJ : SoftBank to Sell $41 Billion in Assets, Plans Big Share Buyback

SoftBank to Sell $41 Billion in Assets, Plans Big Share Buyback
Japanese tech giant will spend up to $18 billion for share buybacks

SoftBank Group Corp. said it planned to sell up to ¥4.5 trillion ($41 billion) of its assets to buy back shares and redeem debt, in an unprecedented move to combat the tumbling price of its stocks and bonds.

The company said it would spend up to $18 billion for share buybacks after the global markets rout caused by the coronavirus pandemic raised concerns about the value of its investments and one of the world’s most aggressive activists had pushed for a large buyback.

The Japanese technology and investment company said it would use the balance of the funds it raised for paying back debt and increasing cash reserves.

“This will allow us to strengthen our balance sheet while significantly reducing debt,” Chief Executive Masayoshi Son said.

SoftBank said its shares were substantially undervalued. They had fallen more than 50% from the year’s high in February before gaining 19% following the announcement Monday. The shares rose by their daily limit.

SoftBank said the transactions would be executed over the next year. Combined with a previously announced ¥500 billion share buyback program, the company said it could end up repurchasing 45% of its shares outstanding.

Elliott Management Corp., which had recently built a $2.5 billion stake in the Japanese tech giant, was pushing for as much as $20 billion in share purchases, The Wall Street Journal has reported.

SoftBank didn’t say which assets it planned to sell. Its most valuable holding is in Chinese internet company Alibaba Group Holding Ltd., and it also holds a majority stake in a major Japanese telecommunications provider, SoftBank Corp., which is separately listed in Tokyo.

SoftBank Group said its board hired an independent search firm to identify up to three director candidates to be nominated at this year’s annual general meeting of shareholders.

FT : WeWork braces for fight as SoftBank wavers on stock deal

WeWork braces for fight as SoftBank wavers on stock deal
Office provider vows ‘all necessary actions’ to ensure SoftBank carries out agreed $3bn purchase

Several WeWork directors have publicly attacked SoftBank for attempting to walk away from a promised $3bn investment in the office provider, describing the Japanese company’s plan to pull out of the deal as “inappropriate and dishonest”.

Bruce Dunlevie and Lew Frankfort, the two WeWork directors who oversaw and approved the company’s bailout last autumn and who sit on the special board committee, said they would take “all necessary actions” to ensure that SoftBank carried out its agreed purchase of $3bn of stock from employees and shareholders. 

“Not only is SoftBank obligated to consummate the tender offer as detailed by the master transaction agreement, but its excuses for not trying to close are inappropriate and dishonest,” Mr Dunlevie and Mr Frankfort said on Sunday. 

“Further, SoftBank has made numerous assurances to employees, and reneging on the agreement would be completely unethical, especially given the current environment,” they added. 

The Japanese telecoms-to-technology group notified WeWork investors on March 17 that regulatory investigations into the company could allow it back out of the planned share purchases, which included a buyout of as much as $970m worth of shares from WeWork co-founder Adam Neumann.

The threat from SoftBank raised scores of questions, both for the future of WeWork and for the health of the Japanese group itself.

Shares in SoftBank have more than halved since late February when a global stock sell-off sparked by the coronavirus outbreak took hold, a hit far worse than the declines experienced by the broader market. 

SoftBank said on Sunday that it continued to honour its obligations and had already provided more than $5bn in working capital to WeWork since October when it agreed to rescue the company. The $5bn included a $1.5bn cash injection as well as $2.2bn in debt and a $1.75bn line of credit for WeWork from Goldman Sachs that SoftBank guaranteed.

“The tender offer has no impact on SoftBank’s commitment to WeWork or on the financial strength of the business,” SoftBank said in a statement. “SoftBank has informed stockholders that all of the agreed-upon closing conditions must be satisfied before the tender offer can be completed. As of now, they are not.”

WeWork declined to comment.

A fight between WeWork, investors including Mr Neumann and SoftBank would mark a stunning turn for the group at a time when it is grappling with the fallout from the coronavirus. It would involve some of the biggest names in the legal world, with lawyers from Skadden Arps, Paul Weiss, Weil Gotshal & Manges, Morrison & Foerster and Wilson Sonsini all involved.

The bailout was meant to turn the tide at WeWork, which had racked up billions of dollars of losses as it expanded to more than 140 cities. A new leadership team installed by SoftBank had started work on cost cuts and renegotiating leases with its landlords.

Now, with the WeWork board in disagreement — SoftBank has appointed several board members alongside Messrs Dunlevie and Frankfort — it is unclear how the company will move forward. 

SoftBank’s argument in favour of backing away from the $3bn share tender will hinge on how a US judge interprets wording in its takeover agreement. The Japanese group told shareholders it had the ability to withdraw from the agreement if it could prove investigations by the Securities and Exchange Commission or the US attorney-general for the Southern District of New York would have a “material adverse effect” on the company, or result in a “material liability” to SoftBank or its Saudi-backed Vision Fund.

The SEC has been scrutinising WeWork and Mr Neumann over how they presented financial information and the company’s valuation to employees and investors, according to people briefed on the matter.

Few companies have had success triggering a material adverse effect clause, although it has led to deals being renegotiated.

The $3bn share buyout was expected to pay out roughly $350m to Mr Dunlevie’s firm Benchmark Capital if it tendered its entire stake, according to documents reviewed by the Financial Times. Early WeWork employees also had been eagerly awaiting the disbursement from SoftBank after the WeWork initial public offering was aborted last year.