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Last Updated: Monday, 3 April 2006, 11:56 GMT 12:56 UK
Acquisitions drive markets talk

By Jamie Robertson
BBC World business presenter

If March can be characterised by a single theme, it was the month when a groundswell of takeovers and mergers in the Western markets developed into a wave.

It's a wave that has caused political upsets across the European continent, carrying with it "economic patriotism"/protectionism arguments, and what analysts joyfully call a re-evaluation of stock prices.

A camera monitor shows E.On boss Ulf Bernotat

Bids have included E.On's approach for Endesa, Gaz de France for Suez, possibly Enel for Suez and Nasdaq for the LSE.

But in all the excitement, the Global 30 index of the world's biggest companies rose just 2%, which might indicate that such re-evaluations should be treated with caution. Business appears to be good, but perhaps not that good.

In Japan the markets were spared intense merger and acquisition activity, but the Nikkei still topped 17,000 by the month end.

Yet one sober set of figures on Japanese industrial production (down 1.7%) this week struck a warning note to Jonathan Allum at KBC Financial Products.

"We expected a small rise and we got a relatively large decline - it does underline the potential problems and the fact that Japan doesn't grow at this rate for ever," he said.

Telecoms sector

While none of the Global 30 members are being bid for, German utility giant E.On's bid for Endesa of Spain has kicked up a takeover storm.

Vodafone store
Vodafone may soon be selling its stake in Verizon Wireless

E.On's bid has seen the Spanish grumble about national interests, and the European Commission threaten to do its worst if the sanctity of open markets is not upheld.

Vodafone managed to sell its Japanese assets to the internet investment group Softbank in March, as expected, and that helped it to become the best performer of the index, bouncing back 11.9% in March from its February collapse.

But AT&T's planned purchase of Bell South has also affected Vodafone - AT&T's rival Verizon needs to up its game to match AT&T, and to do that it is now more willing to buy back the 45% of Verizon Wireless that is owned by Vodafone.

Until now it has been Vodafone that's been keen to sell. Now the balance has shifted, with Verizon keen to buy. Verizon, another BBC Global 30 member, is up 5% on the month.

Vodafone is still not free of negative news - EU regulators appear to be getting the bit between their collective teeth in the matter of "roaming charges".

These are the high charges customers face when using mobiles abroad. Competition and repeated warnings have had little effect on reducing prices, so the European Commission has said new regulations could be in force as soon as June.

At the same time, the company announced it will cut data charges for music downloads.

While this may hit income in the short term, with a fifth of music sales expected to be downloaded by the end of the year Vodafone can't afford to loose market share.

Indian marketplace

Nokia was the BBC's Global 30 second best performer, rising 8.1% in March as it raised its 2006 growth forecasts for the global mobile handset market - from 10% to 15%.

Tesco carrier bags
Tesco is eyeing the Indian marketplace

It also opened its first factory in India, making handsets and network equipment at a plant that will eventually employ 10,000 people.

The company reckons India will become the second largest handset market in the world by 2010, but the factory will also be exporting all through South East Asia.

"In the next dynamic of world growth it will be the players that can dominate Asia's key growth areas - China and India - that will have a lead in the global handset wars," said Stephen Pope, head of equity research at Cantor Fitzgerald Europe.

March was also the month that Microsoft warned that its new Vista operating system to replace Windows would be delayed until January (commercial customers may get it in November). The system is already a year late.

Microsoft shares fell 2.5% on the announcement - they are up 1.5% this month.

However, shares in microchip manufacturers around the world slumped as investors decided that no-one would buy a new computer in the Christmas run-up this year if they were going to have to shell out for a new operating system a month later.

Some analysts estimated the industry could lose about $4bn of PC sales. One technology analyst, Rupert Goodwins of ZDnet, told the BBC's World Business Report: "As there's no popular alternative to Microsoft Vista, Microsoft loses - but nobody wins."

In South Korea, Samsung's shares are down 8.4% this month - it's the world's top maker of DRAM chips for PCs.

The fact that it said its TV sales would hit US$10bn this year (up from $6.5bn last year) was cold comfort: margins in this market are expected to remain low for the new flat screens since there is so much competition between major players such as Sony and Sharp.

There are signs the UK's Tesco may get a foot in the door of the $250bn Indian grocery market after it said it may do a deal with Bharti Enterprises (controlled by telecoms tycoon Sunil Mittal) to launch a joint venture chain of supermarkets.

Supermarket sector

But Tesco's shares are down 0.9% this month.

Wal-Mart also has designs on India - its vice chairman Mike Duke was in India this week and says he's heard encouraging noises from government officials on foreign direct investment into food retailing, despite political opposition.

Wal-Mart was the third best performer on the BBC's Global 30 Index, rising some 7%.

There are also reports that Tesco, Wal-Mart, Carrefour of France and Shanghai based Lianhua are competing to buy China's 15th biggest retailer, Trust-Mart, possibly for around $1bn.

The commodity stocks dutifully followed the upward march of oil and metal prices at the end of the month. BHP Billiton rose 6.1%, BP 5.2%.

t came as little surprise when, a few days after gas prices rose a staggering 300% in the UK in a single hour, BP said that profits in 2005 from trading oil and natural gas had jumped 56%.

In the US the oil companies were once again hauled in front of Senators to defend their massive profits, this time concentrating on the effect of consolidation in the industry on prices - there were 2,600 oil mergers in the 1990s.

Unsurprisingly Rex Tillerson of Exxon (up 4.3% this month) said it had had no effect and the companies had to be big to compete.

In China meanwhile, the government said mining companies were reaping "huge and unreasonable" profits from iron ore sales and the country wouldn't increases prices.

BBC Global 30 intraday chart


FTSE 100
22.84 0.42%
18.55 0.32%
Cac 40
14.37 0.38%
Dow Jones
78.53 0.76%
35.31 1.58%
Data delayed by at least 15 minutes

Dollar strength boosts Global 30
02 Dec 05 |  Business

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