09/05/2014 World Business Report


09/05/2014

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Brazil. Now, it is time for World Business

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Report. Omnicom and Publicis call off their

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billion`dollar merger. And, the euro makes a comeback, but not everyone

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is happy about it. Welcome to World Business Report. In just a moment,

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more from the World Economic Forum in Abuja, Nigeria, but first the

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sour, it looked like a marriage made in heaven, but it seems their

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relationship went sour before they could tie the knot. I am talking

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about these two chaps. A deal to create the world's biggest

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advertising company, which has collapsed in the past few hours.

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Omnicom, which is the biggest ad firm in the US, and French group

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Publicis, agreed a $35 billion merger last July that would have

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transformed the advertising industry. Here, you can see the two

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bosses in a show of transatlantic company. It has emerged that they

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have broken down, with emerging tensions between the two sides.

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Michelle, what are the two companies saying about the split? We have

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heard from Omnicom, saying that essentially this was a breakup

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they've blamed on difficulties tried to get the deal done in a timely

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fashion. It was a sentiment echoed also by Publicis. There were also

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problems with costs that were mounting, problems on the legal

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side, and issues relating to taxes. Some observers have also been

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speculating that it was more than that. That there were problems

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behind the scenes, amongst the personalities trying to merge the

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two cultures. Weston is being raised about who would lead the agency

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going forward `` questions were being raised. I heard that the

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merger was never definite, but there was never a certainty. All along, he

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has said that, he has been sceptical. The advertising industry

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is full of larger`than`life personalities, perhaps that was part

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of this. Also, if you look back at Martin Sorrell, who runs the

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world's second biggest advertising agency, he has pointed out that if

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you look at these two agencies, combine together they have many

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competing clients. For example, one of the great rivalries in corporate

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America is between Coca`Cola and Pepsi. They were each represented by

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Publicis and also by Omnicom, so there were questions over how these

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two accounts will be managed, and the same question again with other

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clients. The client had yet to be persuaded of the necessary logic of

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this deal, but of course the advertising industry has changed,

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the landscape is shifting, you have more and more adverts being placed

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on sites like Facebook, technology companies entering into the market,

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so the question going forward will be, what will these two agencies

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look like in the future? Exactly, I was just thinking as you are

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speaking, I don't think this is the last we have heard of this.

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More encouraging economic news from China this morning, with evidence

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that inflation eased last month. Let's get the latest from Rico Hizon

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in Singapore. Good to see you as ever. Inflation is easing? Yes, and

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yet the market here in Asia with the news, prices are coming down a bit.

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The data gives the government more leeway if needed to stimulate the

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slowing economy, consumer prices are rising by 1.8% over a year earlier.

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Down from March's 2.4% increase, and that was led by the politically

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sensitive food prices. This gives Asia a bit more room for other

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initiatives to stimulate the economy after growth declined to 7.4% in the

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latest quarter. In a sign of concern over possible job losses in the

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weaker economy, Beijing launched in March a mini stimulus initiative,

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boosting spending on building railways and other public works.

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Despite this good news, analyst say the economy may have bottomed out,

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but the recovery will be slow. Over the last three days, we have been

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reporting from the World Economic Forum, taking place in Abuja,

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Nigeria. Government and business leaders there were attending the

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event, known as Africa's Davos, to be a global showcase for Nigeria as

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a fast`growing economy, full of opportunity. It has been

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overshadowed by concerns over the stability and security of the

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country. We put those concerns to the head of Nigeria's largest

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private energy company. The risk that really affect investments is

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not in Nigeria. Would you have in Nigeria is challenges, in terms of

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building a business. The ultimate aim in business is to make a good

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return, and Nigeria has come at it and returned in many places. There

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may be challenges where we have to build some infrastructure,

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challenges with getting licences, soft challenges in terms of getting

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business started. Once you are up and running, it is a success. If you

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look at it from the point of view of large corporations and the telecoms

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industry, where we had in 2000 two problems with the licensing process.

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Two companies got licences, and we became the largest market

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eventually, but they had to content with many things. Let's have a look

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at the euro, because since the US and debt crisis receded in the

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region's economies began to recover, the single currency has

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really bounced back. Too strongly in, in fact, for many in France,

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where business leaders are complaining it is hitting their

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profits at making their exports unviable. President Francois

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Hollande is beginning talks with Angela Merkel today. Against the US

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dollar on Thursday, the euro touched almost 1.40 cents, which is the

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highest in around 2.5 years. The euro has also surged almost 14%

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against the dollar since the summer of 2012. That has made things tough

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for European firms competing with US rivals. On Thursday, the European

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Central bank boss underlined his own concerns about the strength of the

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euro. The strengthening of the exchange rate in the context of low

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inflation is cause that is in view of the governing council. We are

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speaking to a senior economist at Westpac bank. A cause for serious

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concern. What do you make of those comments? Think he is making the

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point that already very low inflation in the eurozone risks

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becoming even lower, potentially even deflationary, if the euro were

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to insist on deflating. Your central bank is one of the few that hasn't

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gone down the quantitative easing path. The Bank of England has, the

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Bank of Japan, the Fed in the US. That tends to weaken currencies, so

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with this there is talk about some easing potentially coming through

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from the ECB potentially next month, could there be some hint of

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quantitive easing down the path for the ECB? We think there could be.

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What do you think your reaction could be that? What if the ECB goes

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down that path? You would think it would weaken the currency, and that

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is the hope. He has done some pretty awesome things, reversing policy

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errors in his first two meetings, the long`term refinancing operation,

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sorting out the banking credit crunch in 2011. Portuguese

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government bond yields have them down to 3.5%. He has done a lot, and

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he does something along the lines of quantitive easing, which we thought

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would not be possible, they can't fight government bonds. There is no

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asset back market to speak of, but if he manages to come up with a QE

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plan, he might be rewarded, that is the curse of the courageous. If he

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gets that sort of a response it could be problematic. Lots for

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Angela Merkel and Francois Hollande to talk about.

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Apple is close to paying $3.2 billion for Beats electronics. They

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are the maker of the trendy headphones, which also runs a

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subscription music service, and was founded by Doctor dre in 2008. It

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would be Apple's biggest ever takeover, if it goes through.

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Analysts say they are puzzled by it. Asian shares slumped on Friday,

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because of caution from investors about the situation in Ukraine.

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I will be back in a moment relook at the papers. `` for a look.

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The government is being urged to make big changes to the way

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terrorism is tackled in Britain, in order to deal with groups like Al

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Qaeda. The home affairs committee says the Metropolitan Police should

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be stripped of its responsibility for counter`terrorism. Just 18

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