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10 states could scuttle T-Mobile’s deal for Sprint
A lawsuit filed by attorneys general in 10 states aims to block T-Mobile’s $26 billion takeover of Sprint — and could, at the least, tie up the merger for a long time, Tiffany Tsu and Matt Goldstein of the NYT report.
The states argued that the deal could lead to higher prices for consumers because the number of major national wireless carriers would shrink to three from four. Letitia James, New York’s attorney general, said that it’s “exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.”
Yesterday’s lawsuit was a direct challenge to federal regulators, some of whom said they are backing the deal. The chairman of the F.C.C., Ajit Pai, supported the transaction after T-Mobile and Sprint agreed to sell the Boost Mobile wireless brand to help create a new carrier. And he pointed to their pledges to help expand 5G wireless networks across the country.
Even if the lawsuit ultimately fails, it could delay the deal significantly. The attorneys general have asked for an injunction in the event that federal regulators approve the sale before their case wends its way through the courts.
Investors are getting more pessimistic about the sale. Shares in Sprint slumped nearly 6 percent yesterday, while those in T-Mobile fell 1.6 percent. “The lawsuit is a setback so large that it wouldn’t be a surprise if the companies soon called off the deal,” Tara Lachapelle of Bloomberg Opinion writes.
Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York and Michael J. de la Merced in London.
Foxconn says it can make iPhones outside of China
The Taiwanese manufacturing giant said yesterday that it could make iPhones bound for the U.S. outside of China, which would help Apple cope with Washington’s trade war with Beijing.
“Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the U.S. market,” Liu Young-way, a senior Foxconn executive, said at the company’s first-ever investor meeting yesterday.
The company said it has plants in over a half-dozen countries, including Brazil, Japan and Vietnam. Foxconn has begun exploring making some iPhone models in India, and it plans to open a plant in Wisconsin.
Apple hasn’t asked Foxconn to move production out of China just yet, Mr. Liu said.
But making iPhones isn’t just about assembling the finished product. Many of the components that go into the devices are made in China as well, Neil Mawston, an analyst at Strategy Analytics, told Bloomberg.
All this raises a bigger question about where an iPhone is “made.” Tim Culpan of Bloomberg Opinion points out that Apple, not Foxconn, did most of the hard work of creating the device, and has also reaped the huge operating profits that follow. So an iPhone could reasonably be described as being made in America.
A fake Mark Zuckerberg video tests Facebook’s rules
It looks like a video of the Facebook founder speaking — only he’s talking about making billions from stolen personal data. What the Instagram clip really represents is the challenge posed by new software that can sow misinformation online.
“Imagine this for a second: one man, with total control of billions of people’s stolen data, all their secrets, their lives, their futures,” Mr. Zuckerberg appears to say. “I owe it all to Spectre. Spectre showed me that whoever controls the data controls the future.”
The video “is easily recognizable as a fake, in part because the voice paired with the image sounds only marginally like Mr. Zuckerberg,” Cade Metz of the NYT writes. “And Spectre is a reference to a fictional, evil organization in James Bond lore.”
The so-called deepfake video was created by two artists, Bill Posters and Daniel Howe, using dialogue-replacement software from the Israeli advertising company Canny AI. An executive at Canny told Samantha Cole of Vice that artificial intelligence software studied a clip of Mr. Zuckerberg and then reconstructed his mouth movements to match those of a voice actor.
It emerged after Facebook declined to remove a doctored video of Nancy Pelosi, the House speaker, appearing to drunkenly slur her words. (Ms. Pelosi has reportedly snubbed efforts by Mr. Zuckerberg to discuss online misinformation because of his company’s decision, according to the WaPo.)
Instagram, which is owned by Facebook, will treat the video of Mr. Zuckerberg the same as it treated the one of Ms. Pelosi, according to a spokeswoman: “If third-party fact checkers mark it as false, we will filter it from Instagram’s recommendation surfaces like Explore and hashtag pages.”
Bill Ackman opposes United Technologies’ big deal
The hedge fund manager told United Technologies that its plan to combine its aerospace division with Raytheon “makes no sense,” adding to growing skepticism of the megamerger.
Mr. Ackman emailed the C.E.O. of United Technologies, Greg Hayes, on Sunday after reports said the deal was near. The investor said that he couldn’t understand the logic of a deal that would combine the company’s aerospace unit with “a large business of inferior quality.”
The companies argue that the merger would help them cut costs and potentially leave more money to spend on R.&D. (As Peter Eavis of the NYT notes, however, increased research spending isn’t a given.)
Mr. Ackman’s email shows rising dissatisfaction with the deal. President Trump has said he’s “a little concerned” that it could lead to higher prices for military equipment. And shares in United Technologies have dropped 7 percent since the proposed transaction was announced; Raytheon shares have fallen 4.5 percent.
The Justice Dept.’s antitrust chief fires a shot at Big Tech
The head of the Justice Department’s antitrust division, Makan Delrahim, said in a speech yesterday that low prices and free products won’t save tech giants from scrutiny over potentially monopolistic practices.
“There are only one or two significant players in important digital spaces, including internet search, social networks, mobile and desktop operating systems, and electronic book sales,” Mr. Delrahim said at a conference in Israel, according to Kadhim Shubber of the FT.
The fact that Facebook and Google offer products free isn’t necessarily a defense, he added. “Diminished quality” of both data protection and freedom of speech could count as consumer harm as well.
It’s an expansive view of competition laws, sometimes known as “hipster antitrust,” that is gaining traction in Washington.
The House began an expansive antitrust inquiry into the industry yesterday with a hearing on tech companies’ effects on the news media. Lawmakers said they were troubled that Google and Facebook have gobbled up most of the digital ad market, leaving little to news organizations.
“Smaller news organizations don’t stand a fair negotiating chance when they try to negotiate deals with the platform giants,” Representative Doug Collins, Republican of Georgia, said.
More: A close look at Mr. Delrahim and Joe Simons of the Federal Trade Commission, who are leading the Trump administration’s scrutiny of the tech giants.
Mary Meeker says the internet is getting more toxic
The investor and former analyst Mary Meeker yesterday unveiled the latest edition of her Internet Trends Report — a famously detailed look at the state of the online industry. Here are some of the key takeaways from the 333-page presentation, according to Rani Molla of Recode.
• “Some 51 percent of the world — 3.8 billion people — were internet users last year, up from 49 percent (3.6 billion) in 2017. Growth slowed to about 6 percent in 2018 because so many people have come online that new users are harder to come by.”
• “The internet will become more of a cesspool: Getting rid of problematic content becomes more difficult on a large scale, and the very nature of internet communication allows that content to be amplified much more than before.”
• “Americans are spending more time with digital media than ever: 6.3 hours a day in 2018, up 7 percent from the year before. Most of that growth is coming from mobile and other connected devices, while time spent on computers declines.”
• “As privacy becomes a bigger selling point, expect more options to make your online communications safe. In Q1, 87 percent of global web traffic was encrypted, up from 53 percent three years ago.”
• “Internet ad spending accelerated in the U.S., up 22 percent in 2018. Most of the spending is still on Google and Facebook, but companies like Amazon and Twitter are getting a growing share.”
Executives who have been approached about becoming Wells Fargo’s next C.E.O., including Gordon Smith of JPMorgan Chase and Bill Demchak of PNC Financial, reportedly aren’t interested.
The proxy advisory firms I.S.S. and Glass Lewis recommended that Nissan shareholders vote the carmaker’s C.E.O., Hiroto Saikawa, off its board.
Corie Barry officially took over as the C.E.O. of Best Buy yesterday, succeeding Hubert Joly.
The speed read
• Slack is expected to be valued at up to $17 billion in its I.P.O. next week, up from the $7.1 billion valuation of its last private fund-raising round. (Bloomberg)
• KKR agreed to buy Axel Springer, in partnership with the German media company’s C.E.O. and the widow of its founder. (Bloomberg)
• CrowdStrike priced its I.P.O. at $34 a share, above expectations, valuing the cybersecurity software provider at $6.7 billion. (CNBC)
• Europe’s antitrust regulator has blocked the proposed merger of the European steel units of Tata Steel and Thyssenkrupp. (WSJ)
• Mattel has rejected another merger proposal from a rival, MGA Entertainment. (Reuters)
• Deutsche Bank faces questions about how it can raise capital when its stock price is so low. (FT)
Politics and policy
• Representative Kevin Brady, one of the top Republicans in the House, conceded that the Trump tax cuts may not pay for themselves. (WaPo)
• Here’s an effort to decode the mystery-shrouded agreement between the U.S. and Mexico over immigration. (WaPo)
• The Treasury Department has blocked an effort by some states to protect federal tax deductions for state and local taxes. (WSJ)
• Tariffs have divided Republicans in Arizona, increasing the chances that Democrats can score political victories there. (NYT)
• House Democrats will introduce legislation aimed at stopping the Trump administration’s arms sales to Saudi Arabia. (WaPo)
• Chinese investment firms’ money is no longer welcome in Silicon Valley. (WSJ)
• Huawei reportedly canceled the introduction of a new Windows laptop because of U.S. restrictions on its access to Microsoft software and Intel chips. (Information)
• Beijing is stocking up on trade negotiations veterans to help reach an accord with Washington. (NYT)
• Commerce Secretary Wilbur Ross predicts that the U.S. will reach a trade deal with China: “Even shooting wars end in negotiations.” (CNBC)
• Tesla shareholders failed to back a measure that would have trimmed Elon Musk’s voting power at the carmaker. (WSJ)
• Computer-driven hedge funds transformed stock trading. Now they’re keen to do the same to bond trading. (FT)
• Royal Dutch Shell has called off plans to create a ride-hailing service. (FT)
• Apple is reportedly in talks to buy the German operations of Intel’s smartphone modem business. (Information)
• Tucker Roberts, the son of Comcast’s C.E.O., is trying to build an e-sports empire. (Bloomberg)
Best of the rest
• A Democratic member of the Commodity Futures Trading Commission has warned that climate change could pose risks to U.S. financial markets. (NYT)
• Deutsche Bank warned hundreds of top clients, including several Blackstone hedge funds, that it would cut off banking services to them unless they provided more information on their identity. (FT)
• Two executives at Tokio Marine Kiln, a top insurance firm, have resigned amid accusations of sexual misconduct. (Bloomberg)
• Marc Benioff, the outspoken C.E.O. of Salesforce, says he’s not a social activist. (Fortune)
• Regular veggie burgers are struggling to compete with offerings from Impossible Brands and Beyond Meat. Shares in Beyond plunged yesterday, however, after a JPMorgan Chase analyst said they were overvalued. (WSJ, CNBC)
• The economist Martin Feldstein, who advised three presidents, has died at 79. (WSJ)
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