Reflection on the Treatment of Sexual Assault Victims in TurkeyMay 12, 2020
A Law Student & Law Films Series: Part 4May 16, 2020
The round-up of the stories that a budding Student Lawyer should be aware of this week. Sign up here to get these updates in your inbox every week.
Merger of the Telecoms Giants
Article by Gina Asadi (recent BPP LLM Legal Practice (Solicitors) graduate)
Mobile phone operator, O2, and broadband giant, Virgin Media, are set to merge and create one of the UK’s largest telecoms companies. The merger will pave the way for the combined company to compete with other companies in the industry, such as, Vodafone and BT.
The parent of Virgin Media, Liberty Global, and the parent of O2, Telefonica, have confirmed that they have agreed terms for combining the two UK companies, in an attempt to reshape the telecoms industry. The terms of the merger will see the two companies join forces through a new 50-50 joint venture of their respective fixed-line broadband and mobile network businesses. The deal values O2 at £12.7 billion and Virgin Media at £18.7 billion and the combined business is expected to deliver “substantial synergies” of £6.2 billion. The proposed merger is set to complete around the middle of 2021, provided it receives all regulatory approvals from the Competition and Markets Authority. Analysts have raised concerns over a possible competing bid from Vodafone in the meantime; however, Vodafone has confirmed that it will not be making an offer as it reported strong results and maintained its dividends.
The deal is believed to place the new combined entity at the forefront of the telecoms industry and secure its position as a competitor of BT and Sky. The combination of the two companies will mean that O2’s mobile network will benefit from Virgin Media’s fibre optic network, which is crucial for survival as the country moves towards ultrafast 5G infrastructure. While, Virgin Media will benefit from O2’s mobile network, allowing it to directly compete with BT’s EE. The deal will leave Three UK as the only mobile operator in the industry without its own fixed line base.
The £31.4 billion merger will be the largest M&A deal since the outbreak of the Coronavirus pandemic and it comes as a glimmer of hope for the future economy. Telefonica and Liberty Global have highlighted the possibility of investing £10 billion in the UK over the next five years, this in addition to the current merger will help boost the UK Economy. Further, such a movement in the telecoms industry could pave the way for other companies in the industry to expand their businesses, which will also help the UK overcome the Covid-19 recession. The rejuvenation of the UK economy will always generate work for city law firms; firms such as, Allen & Overy, Clifford Chance and Herbert Smith Freehills have been called upon to advise on the O2 and Virgin Media merger.
Canary Wharf Back to Work
Article by Jamie Howarth (LLB Law student at ULaw)
Following the Government’s relaxation on the lockdown, one of the main financial districts in the world is beginning to return to work. The complex, which has a full working capacity of around 120,000 people and contains roughly 16m sq ft of office and retail space, has created plans to bring its tenants back to work as Covid-19 begins to slow. Being a centrally-managed private estate, the Canary Wharf Group has been co-ordinated the return with the businesses that occupy its premises over the recent weeks.
Whilst Howard Dawber, the managing director of strategy, expected roughly 10% back this week, numbers were only slightly higher than the consistent 3,000 that have been there during the lockdown. This group consists of back-end IT and infrastructure workers and has been supplemented by a small number of bankers and lawyers that ventured back to the offices this week. The estate, which is home to the world headquarters of Clifford Chance, has implemented measures such as staggered returns, fewer people in lifts, and chequered office spaces, in order to maintain social distancing policy. Numerous markers have been put up around the offices to remind workers of the measures, and it seems as though the Consortium is well prepared for the return of its workforce. Dawber foresees around 20% of the employees returning within the next few weeks.
However, the untouchables are still very much at the mercy of the Government. The efficiency and efficacy of the plans to return still very much depends on the re-opening of schools and public transport availability. Canary Wharf is in talks with TfL regarding social distancing and queuing, and more bike racks are being installed throughout the complex, in an effort to avoid clogging up the public transport system. In the coming weeks, it will be interesting to see how big companies balance the return to work and the protection of their employees.
New iPhone Production Delayed by a Month
Article by Jamie Adair (1st year LLB student at Warwick University)
The Wall Street Journal has reported that Apple is set to delay the mass production of its upcoming iPhone 12 by approximately a month.
The decision comes following the severe disruption to Apple’s supply chains in Asia and reduced consumer demand brought about by the COVID-19 pandemic.
The tech giant typically unveils its new iPhone model in September and then starts shipping them before the end of the month. While it is still expected that the iPhone 12 will be launched in September, the delays in production mean that there could be shortages later in the year, potentially harming the company’s revenue.
The launch and availability of new iPhones is critical for Apple’s financial success. Despite a supposed recent shift of attention towards increasing revenues through its services and subscriptions, such as Apple Music, Apple TV+ and Apple Arcade, the hardware sales are still the driver behind the company’s business model, with the iPhone accounting for 61% of its revenue in its last quarterly report.
In addition to supply struggles, Apple is facing a major demand-related issue. The unemployment rate recently surged to 14.7% in the USA and 7.5 million employees in the UK have been furloughed. Consumers are likely to put off purchasing such a luxury item amidst the current economic uncertainty and considering some households have seen their incomes collapse, buying the new iPhone (with prices of some models starting at $1,000 in recent years) probably isn’t at the top of most people’s to-do list.
The release of the iPhone 12 coincides with the development of 5G networks around the world and some reports have suggested the new model provides 5G connectivity, among other upgrades. The success of this launch is critical if Apple is keen to remain competitive with other smartphone manufacturers such as Samsung, LG and OnePlus who are already selling devices with 5G support. However, when asked about 5G, Apple CEO Tim Cook responded that we’re still ‘in the early innings of its deployment on a global basis’.
The performance and continued resilience of Big Tech has been a silver lining during the global pandemic and Apple will be eager to ensure that the release of the new iPhone later in the year will help maintain its stature among the tech giants and reinforce its reputation as one of the most financially successful companies in the world, even in spite of delays in production.
You can read more here.
Eurozone’s Investment Problem
Article by Sofiya Stanchak (Third Year LLB student, University of Surrey)
An investment can be defined as money put into something with the expectation of future benefits, for example investing into stocks, bonds and shares expects a gain through an interest rate. Another form of investment is dedicated to capital spending such as buying new machines, building bigger factories or buying robots to enable automation, which builds the capacity of an entity to produce whatever goods and services it markets. Investment influences the rate of economic growth as it is a component of aggregate demand (the total amount for goods and services within a particular market) and influences the productivity capacity of the economy, boosting the economic growth of a country.
In the recent weeks, investment in the eurozone has dramatically dropped, and the negative impact it has had on the economy is likely to continue even after companies begin to emerge from the coronavirus lockdown.
Across Europe, capital expenditure (money an organisation or corporate entity spends to buy, maintain or improve its fixed assets, such as buildings, vehicles, equipment or land) has contracted sharply, whilst borrowing to invest has dropped which imitates businesses’ rising cash needs and dipping output. The demand for businesses to take out loans for long-term investment from eurozone banks fell to a balance of -15% in the first quarter, compared to 0 in the previous three months. In comparison, the demand for working capital (short-term loans that can be offered by a bank or an NBFC [nonbank financial company] and helps to cover the daily expenses of a company when they’re short of cash) jumped to a net balance of 26%, from 0 in the previous quarter, as businesses pursued cash to cover expenses such as rents and wages.
France has reported its largest contraction in gross fixed capital formation on record and Spain’s contraction was also near-record levels. Data for Germany, Italy and the UK is not yet published but is expected to show a similar trend. Economists expect Germany to record a 2.2% quarter-on-quarter fall in GDP and eurozone economist Claus Vistesen said the fall in investment is ‘likely to be the main driver’ of Germany’s expected economic contraction. Peripheral European countries (such as Portugal, Malta, Greece) are expected to have worse economic contractions as they are still recovering from the previous financial crisis and their investment was still about 20% below pre-crisis levels.
Europe’s decline in investment is partly driven by a fall in foreign investment. Foreign investment in western Europe halved in the first three months of the year in comparison with statistics from last year. There were only 848 investment projects recorded, the lowest in a decade and resulted in the loss of 200,000 jobs. UN’s trade body Unctad, forecasts an up to 40% drop in foreign direct investment globally in 2020 compared to last year. Looking at the production of investment goods, Germany reported a 17% fall in March compared to February, while France and Spain reported wider differences.
Even in the aftermath of the lockdown when the economy gradually begins to reopen, businesses will have to start investing to adjust their business models to the new and temporary social distancing economy. Bern Colijn, senior economist at ING warns that ‘even with a coronavirus vaccine… it is likely that businesses will remain cautious as the crisis will have had a significant impact on their liquidity’. Thus, even after the lockdowns have been lifted and businesses start to reopen, the economy will take a long while to recover from the drop in investments.