Did Ma Bell Just Come Back to Life?

AT&T just agreed to acquire T-Mobile USA for $39 billion, and I don’t understand why regulators are allowing this re-organization of Ma Bell. I was under the impression that the 1982 settlement with the U.S. Department of Justice was supposed to ensure that this anti-competitive behemoth would not be coming back. But given today’s news, and the fact that AT&T has completed over $100 billion in acquisitions over the past decade, it seems to not only is Ma Bell coming back but she’s stronger than ever.

There will now be just 3 major telephone carriers in the entire United States down from a measly 4. To put that into context, Italy with a population of 60 million has 9 major telephone carriers. The United States with a population of 300 million has 3 major carriers, which works out to be 100 million people per carrier! These guys (and by these guys I really mean AT&T and Verizon) have little to no reason to compete, become more efficient, lower prices, or do anything that a healthy competitive environment encourages, simply because they’ve bought everybody.

Based on today’s market moves, shareholders from both companies seem to be quite giddy. Deutsche Telekom shareholders are especially delighted given that in 2001 they paid $50.7 billion for VoiceStream (which later became T-Mobile). But like a lot of the crappy deals made at the turn of the century, things did not quite work out as planned. The unit was recently valued at between $15 and $20 billion, so the $39 billion acquisition price gives them 19 - 24 billion new reasons to be in a good cheer... AT&T shareholders on the other hand are probably excited for a very different reason. They just became the top dogs in a field of 3, with plenty of cats to chase! Consumers, prepare for the screwing to begin.

Thoughts on the Forbes 400 List

Here are my thoughts on the recently published Forbes 400 ranking of the world’s wealthiest people:

• Last year saw the list grow to the most billionaires ever. This seems like a great omen for a looming worldwide economic recovery. Though I’m not a professional economist, I’m going to venture a guess that wealthy people tend to be the first to see the benefits of an upswing in economic activity. So if a lot of them got wealthy last year, then the rest of us are sure to follow.

• Last year also saw the largest combined wealth of all on the list. This probably just speaks to the unevenness of global wealth creation. Those in the know not only make far more, but make far more far quicker!

• Carlos Helu Slim’s wealth = $74 billion. Wow! Who would have ever thought that the heir to the Bill Gates throne would be Mexican? It absolutely tickles me that this investment wunderkind has had such a meteoric rise to the top. I just wonder if he’ll top the $100 billion mark...

• China has 115 members on the list. Though a lot has been said and written about China’s growing prominence, there’s nothing like having a triple digit number of billionaires to validate a shift in the earth’s axis.

• America still rules! 413 billionaires, 1 out of every 3 billionaires, 18 of the top 50... yep its true, these shores are still awash with cash.

• Facebook spawns 6 newcomers to the list. I have to admit it, I am absolutely baffled but yet marveled by the success of this little website. Facebook is a toy, albeit a somewhat addictive one, whose primary contribution that I know of is its amazing ability to kill time. Not sure how it makes the leap to billionaire creating machine à la Microsoft, Google, Berkshire Hathaway... but there are 500 million people who would probably vehemently disagree.

The Battle For Libya’s Wealth

The battle for Libya seems to be slowly turning into a protracted civil war that pits the government forces of Colonel Muammar Gaddafi against the will of anti-government protesters. One thing that’s becoming pretty clear is that Gaddafi does not plan to collapse in the manner of Hosni Mubarak as he’s clearly prepared to use military force in a manner that few of the other troubled autocratic regimes have shown a stomach for.

As the world mulls over what will happen to Gaddafi whether he wins or loses, another battle is brewing over the country’s wealth, specifically that owned by the Libyan Investment Authority (LIA). As I stated last week, this $70 billion sovereign wealth fund has been Gaddafi’s primary source of wealth. The fund was founded in 2006 by his son, Seif al-Islam el-Qaddafi, as a means of opening up Libya to the west while simultaneously diversifying the country’s dependence on oil revenues. Over the years, powerful western figures have been drawn into Mr. Qaddafi’s orbit, including the Rothschild family, Prince Andrew of Britain, and the American private equity investors Stephen Schwarzman of Blackstone and David Rubenstein of the Carlyle Group.

Amongst the fund’s listed foreign assets include a 15% oil exploration and production partnership entered into with British Petroleum (BP), an ownership stake in the Dutch-Belgian bank of Fortis (acquired in 2008 as the global credit crunch was getting underway), and a 7.5% share ownership of the Juventus Italian football club.

Over the past couple of weeks, individual countries have begun taking steps to freeze the assets held by LIA or of those held by the directors and managers of the fund. Austria widened a national asset freeze list to include a top official at the Libyan Investment Authority (LIA) because of possible links to Muammar Gaddafi's inner circle. Meanwhile, the UK government froze approximately $3 billion of assets belonging to the LIA, after having initially frozen $1.6 billion in assets linked to Gaddafi and his children. The assets frozen in London include the fund’s $360m stake in Pearson (owner of the Financial Times) and a $480m property portfolio in London.

Not to be left behind, US Treasury secretary Tim Geithner announced last Thursday that they had seized nearly $32 billion in Libyan assets, including those held by the LIA... Despite these efforts, the question remains, what does the seizure of these assets mean for the people of Libya in the long run? If Gaddafi’s government were to prevail and remain in power, would these frozen assets eventually be returned to him? Or what if the Gaddafi’s government collapses, how would all these individual governments ensure that the funds are returned to their rightful owners, the citizens of Libya?