Olympus Corporation Scandal & its aftermath ?

Olympus Corporation is a Japanese manufacturer of Optical equipment and is considered one of the leaders in the industry. It flagship products include Cameras and Endoscopes in addition to all other related products. For the year ended 31 March 2011 the consolidated net sales were US$ 10589 million. The total shareholders’ equity is US $ 3281 million. The group employs close to forty thousand people around the world. Its assets were estimated at US $ 13295 million. On the remarkable aspect is the good will of Olympus Corporation which is valued at US $ 2194 million. Another significant achievement until recent is the ability of the management to sustain the profit level relatively constant at 35 billion yen for several years.

PROFIT MAKING STRATEGY OF THE CORPORATION

Being a Japanese company, Olympus used to have a clear strategy in all the areas of operation. The management has come up with a new idea called FINANCIAL ENGINEERING where they look up the financial aspects from a different angle. The objective of the exercise is to maximize profits for the company from all departments. Olympus Corporation relied on investments to boost profits. There were instances that the investment arm of the corporation was inclined towards financial derivatives and other risky investments. The aftereffect of this strategy was very evident from the books. In 1991 Olympus lost 2.1 billion yen on the value of its investments. By 1998, it suffered sizable trading losses on derivatives. Share market responded unfavorably and the value eroded to a great extent. Score card says the shares plunge by 11% at that time.

In September 2011, Olympus announced it had written off a part of 45 billion yen investment in emerging market bonds. The company also revealed that it had lost a significant amount from interest rates and currency swaps.

PRESS REPORTS

Bloomberg reported that the annual financial reports of Olympus showed a US$ 201 million prior period adjustment entry for “loss related to the purchase of preference share from a third party”.

Financial Times commented that the equity ratio of Olympus is the lowest and at below 14% when compares against the peer group. Olympus is the only Nikkei 225 constituent whose intangible assets exceed net assets. Its goodwill was valued at 168 billion yen and the net assets were only 151 billion yen. This information sent wrong signal to the investors and market alike.

On 1 April 2011 Olympus came up with a big announcement.  Michael Woodford, a Brit, was promoted as President and CEO for the group. He was an Olympus veteran and was in charge of the companies European operation. He was the MD of Olympus Medical Systems (Europe). There were rumors that he was selected to head the company because he was an easy to control guy. Company picked a bottom ranked foreign executive director for some reasons. It was obvious that the company was overlooking other capable managers for this position and there were raised eyebrows from many quarters.

Woodford himself had a bitter experience with the top management when he was heading the European operations. The company went into acquisition of Gyrus Medical Equipment Company in UK without the actual involvement of Mr. Woodford. In fact, it should have come under his purview but got ignored for obvious reasons. The then president Mr. Kikukava pacified him and promised to compensate later. He was then given the overall in charge of European operations in addition to the inclusion as Board member of the main group.

While his stint with the main group, Woodford started noticing some discrepancies in the financial side of the company. He could see that there were significant irregularities in the 2008 acquisition of Gyrus Medical Equipment Company. Upon realizing that he sent few letters to the auditing firm Earnest & Young to get clarity but failed to obtain anything. He then sent the details to another accounting firm PwC and sought some clarifications. His assumptions proved right and the accounting firm confirmed certain facts which made Woodford to think in the line of accounting fraud happened within the company.

PwC examined the earlier write down transaction of US $ 600 million. It came evident that Olympus paid US$ 687 million as an intermediary fee (success fee) to a third party. There were two beneficiary companies on this list. Two US based small firms are involved here - Axes America LLC & Axam Investments ltd (Cayman Island based). Wood ford’s suspicion founds to be right. The success fee of US$ 687 million paid is an all-time record until that time and not heard of in the industry circles.  In fact there was no need for such an exorbitant amount to be released for any consultancy job.

Woodford raised his objections and sought more clarity from the then president Mr. Kikukava but found no avail. Sensing the danger, Mr. Kikukava asked Woodford to step out from the current role he enjoyed. Unrelenting to this, Woodford was removed from the post forcefully and he was stripped of his powers. He was not allowed to speak or vote in the board meeting. Woodform himself said that an junior level executive, upon the instruction from Mr.Kikukava, taken all his belongings including laptop and mobile phones which contain important documents. Kikukava got re appointed as the president and CEO for the group and Mr. Woodford was ousted with immediate effect.

Woodford then took a flight and reached London where he called for a press meet and exposed the whole affair at the Olympus. He produced the relevant documents and other materials with was enough to incriminate the directors at that time especially Mr. Kikukava.  Market responded negatively to this happenings and the share value plunged to a great extent. It almost lost 45-50% of its value hearing the irregularities with Olympus. The share was trading at US$ 38 and was found trading at US$18 after this incident.

WHERE DID THE MONEY GO?

Due to investors demand, the government constituted a committee and its finding were relevant to note. The fees paid as part of the M&A of Gyrus, were exorbitant. The excess money was used to cover up the losses incurred from the earlier investments in derivatives and other dubious investments. This was done to improve the financials in the records.

AFTERMATH

Recent development being, Mr. Kikukava was removed from the post of the president and CEO due to the pressure from the investors especially institutional investors. He apologized before everyone and promised to look into the whole affair by appointing an independent agency. The government was quick to take control of the situation and Mr. Kikukava was arrested and remanded in custody pending enquiry.

Khaleej Times, on 21 April 2012 reported in its business section that the security exchange authorities in Japan approved of the new board to take control of the company. Some of the investors insisted to re-instate Mr. Woodford as President and CEO but did not get much support from others. Woodford himself announced from London that he is not willing to fight a proxy war to take control of the company.

HOW THIS CASE IS IMPORTANT TO US?

Financial irregularities can happen with any company especially when their fundamentals are dubious. This may occur when there are people in the top management who keep their interest before their companies. It is important for any finance student to sense the smoke and be aware of the possibility of these kinds of irregularities or else they will be caught up unaware of the actual situation.

Antony Konnoth, Dubai

RACE FOR SPACE ( Khaleej Times v Gulf News - Some marketing facts)

RACE FOR SPACE (Khaleej Times v Gulf News)

Of late, there was huge media cry to find out who dominates the UAE news world. The focus was predominantly shifted to two major players in this region. Gulf News (GN) is the proclaimed leader with high readership and circulation figures. But things have changed ever since. Challenger Khaleej Times (KT) started giving Gulf News run for their money and territory.

To understand more, let’s dig the history and try to unearth some hidden facts. Khaleej Times is the first ever English daily to publish from UAE. It started in the year 1978 and was owned by Galadhari Brothers. Another publishing group Gulf News, formed a while later, took no time to sense the opportunity and started their’ own newspaper from the country. Two groups were in fact contemporaries if we apply the timeline principle here.

Market did not react favorably at the beginning. For various reasons, KT took the absolute dominance in the mind of readers and was the designated winner. GN was struggling to get customers at that point of the time. In one of the high profile event in 1984, Al Nasr Publications, a prominent business group took over the management of GN. New machinery, new technology and a brand new marketing team worked round the clock to put GN at the top of the mind of the intended readers. The formula worked pretty well. Gulf News attained the top spot in short time by clinching the maximum readers in UAE and gulf.  

Ever since they tasted the victory, there was no look back. It is official now – as per the available stats GN claims a print run of 109 thousand per day in UAE. Khaleej Times was no were near to it. Guessing game continued for a while and the media estimated the KT figures below 50 thousand, not even half of GN's circulation.

Fast forward 2011 - business took an about turn. Quite a few happenings in KT have changed the game overnight. New rules were set in. Numbers started changing in favor of KT. GN subscription figures were stagnant or lost significantly against the overall circulation growth of KT.  Khaleej Times once again rose to fame, this time, for achieving the highest increase in subscribers for the year.

What went in favor for KT? How GN lost its subscribers to the marketing efforts of KT? Let’s get into the gut of the story. Ever since KT began loosing its market share, there were concerted efforts from the management to revisit its strategic plans. Government of Dubai through its investment arm, a holding company, acquired the majority of the shares of the newspaper. The management got revamped and editors were changed. Mr.Rahul Sharma of Hindustan Times fame was given the charge of chief editor. The company also appointed Mr.Didier Brun, the then VP of International Herald Tribune, as CEO. The marketing department was brains stormed and urged to devise a new strategy to grab the readership.

 Media analysts and marketers state many reasons for this turnaround but I personally feel the below FIVE STRATEGIES adopted by KT has killed the competition at point blank.

 

STRATEGY 1

FOCUS ON READERSHIP THAN PER DAY CIRCULATION

News paper companies globally give prominence to per day circulation numbers than the total readership. The water tight business model followed by these companies in relation to their revenue earning capability always insists to abide by this principle. Traditionally, news papers earn 60% - 70% of their revenue from advertising and the rest 30% - 40% from daily sales and annual subscriptions. Advertisers used to focus on per day circulation, but this tread had witnessed a dramatic change. Marketers in various industries started asking for split up details of the newspaper reach in different segments. Mass marketing is passé. Targeted distribution is the new mantra. Anymore it’s not the total circulation number which matter most, but the actual reachable figures. It’s the readership figures now marketers weigh before they advertise their products or insist media guys to do so as part of their media plan. KT got it right, and they kept this as one of their prime strategy to get the mind share of the prospects. The underlying principle is - Circulation numbers automatically increases when readership improves. KT firmly believed on this and it paid off. 

GN always focused on circulation numbers rather than readership and they still wonder what is so important in readership figures if the per day circulation don’t match up and collections don’t click. Only after they started losing subscribers, it seems vital  for them to look up in the readership area and I presume they are serious. They better.....

 

STRATEGY 2

COMMODITIZE THE PRODUCT

This is unheard of in the newspaper industry despite it has some of the features of a mass product. In fact, newspapers cannot be classified as one such. But this has become a ‘food for thought’ line for those inside the KT, especially the marketing bench. This thought process has made the marketing to believe that a product can only be successful if it is made available at all major centers. Soon the product found its place in all educational institutions, gas stations, malls, libraries, ministries and all places where public show up. There were distribution ties up with various agencies, supermarkets, book shops corporate and institutional centers. The idea worked well and the visibility soared to new heights. People started noticing this new trend and in fact bought many copies from these centers to get the real feel of the news, supposedly, to know the another version of the story. Once again the readership increased significantly and the circulation numbers followed. 

On the other hand, GN were known for monetizing every opportunity and the revenue per copy was the most important thing for the company. To see the product from the above angle was something they could not digest.

  

STRATEGY 3

NEW DESIGN – SLIM AND TALL VERSION

It was a jaw drop moment for the readers to see a slim and tall version of the newspaper on their door steps and news stands. KT has become the first newspaper to adopt this new standard in size ( 6 column) & design keeping in mind of the 'ease of reading' and 'handling side' of the news paper. It has followed the foot steps of some of the international newspapers here. The new version showed increased acceptance from the public and readers alike. There is no mystery that the numbers started showed up in the board- Circulation almost doubled.

GN still believe in 8 column newspaper and the marketing sees no threat and still publish the old version but with some design change. What they don’t realize is that the new gen readers prefer concise and capsule news in a newspaper which is manageable and easy to handle while reading on the go or stationary.

STRATEGY 4

STRATEGIC TIE UP WITH IHT (International Herald Tribune)

IHT, The international version of New York Times is a global print winner in the race for space. The strategic tie up of KT with the IHT has increased the acceptance level of the newspaper in the minds of readers. A global touch is always welcomed. People started perceiving that the content is customized to world standards along with the local news.

 GN don’t believe in any strategic tie ups, but interested only in distribution tie ups for some reputed magazines and EXPAT specific language news papers like Malayala Manorama in UAE.

STRATEGY 5

COMPLETE REACH OUT - UNBELIEVABLE PROMOTION OFFERS

KT has come up with some unbelievable subscription offers last year. Pay AED 400 and get AED 250 voucher of DG Sharaf, AED 100 coupon for Baskin Robins and AED 100 coupon which can be redeemed at Yellow Hat showrooms in UAE. You pay 400 Dhs for subscription and get back 500 dhs in return... Wow... In short, this translates in accounting language to free bonus earning - Free newspaper subscription for one year and a bonus of AED 100 !!!

 

The grapevine is that KT now commands a widespread circulation in the market and the revenues have shot up to a meteoric level. No of advertisers have increased dramatically. Ad revenues showed multifold increase from all quarters. International brands like McDonalds entered into long term contracts with KT to publish their advertisements. A new ad item like full cover page (before the actual front page of the newspaper) has become an all time success ad item. Marketing has reaped the benefits. New strategy paid off. GN may be still wondering where their clients have gone hiding.

Let the guessing game continue……

Antony Konnoth, Dubai. 

  

How Etisalat's Efforts To Operate In India Met With A Set Back??

At the outset, let me apologize to all my readers for not posting since last December since I had to complete some assignments related to my job in Dubai. Thanks to all my readers, blog followers and friends who sent  messages and encouraged me to continue writing. I am humbled that I could make a point bold enough to accelerate your thought process. Thank you all once again.

Etisalat's hope of entering to Indian market is now being thwarted by the authorities there legally and  I see no hope in the near future for a come back. I had mentioned in my earlier posting about the mighty position of Etisalat in the Gulf region. It's next only to Saudi Tel in the Arab world and has operations in 18 countries. Soon after it's inception in UAE and enjoying the monopoly status for many years, it had pocketed enough moolah to invest in foreign markets. The reason being, a further expansion in a significant way in the UAE market in terms of new customer acquisitions was not possible as the client base got exhausted fast. And with the arrival of the second operator in 2007 (Du) the matter got further complicated. The only option with Etisalat then was to expand beyond its territorial regions.  The last 5 years we saw Etisalat spreading its wings beyond its limit to  grab shares in some of the major telecom companies in MENA and other Asian countries.

Etisalat has now a controlling stake in Mobily of Saudi Arabia. It enjoys more that 26% share in Pakistan Telecommunications Corporation Ltd (PTCL). Nigeria is the most prominent among the African nations who has the presence of Etisalat. The recent faltered attempt by Etisalat to acquire Zain's (Kuwaiti Telecom conglomerate) share in its Saudi operation and the latest news of its failure to complete due diligence process prior to the acquisition is doing the rounds now in Telecom circles questioning the genuine business interest of Etisalat. Being cash rich and having deep pockets has helped Etisalat surpass all adverse situations but only until recently.

It bite the dust with its plan of foraying into India. It's needless to mention that doing business in India unlike other places has no comparison. It's a different platform altogether. To grab a decent market share is more painful than a camel passing through a needle. Being just a Camel is not enough! There are around 6-9 existing players in each circle to compete with. There are other tricks to be played for keeping afloat which is unique to Indian business environment. Despite knowing this, Etisalat has put a wrong foot in its own shoes.

India's company laws says a foreign company will not get an exclusive start up licence in specific fields of industry. Telecommunication is one such. Government has its own reasons to restrict the operation. We all know security issues are paramount for every nation. These restrictive clauses did not stop the acquisitions hunger of Etisalat.   It has decided to go for a joint venture with an existing Indian operator. The search has ended with the spotting of SWAN TELECOM, the then licence holder for few north eastern regions in India. The Swan Telecom never had any existing operation but only has the licence from TRAI (Telecommunication Authority of India). Within a stipulated period of 6 months it has to start test service and then to full fledged operation. To the surprise of all, Swan Telecom then entered into a joint venture pact with Etisalat. For Etisalat that was the only available opportunity. In fact Etisalat was looking for a strong partner like Aditya Birla Group or Reliance. To its dismay not many Indian companies were willing to shed its stake to a foreign buyer at that point of time. A right valuation could be a significant reason for them to stay away. They knew once operational they could demand multi fold.

Etisalat continued the partnership for few more years and meanwhile tried to get the final licence for operation. By the time it has realised how difficult is to cope with bureaucratic hurdles. Initially it got a stinker from the home department against the continuance of the JV in India as it has a controlling stake in Pakistan Telecom. Policy of the Indian Government forbids granting Telecom license to a company who has operations in Pakistan ,its hostile neighbour based on strong security reasons. Etisalat's local partner somehow kept the issue under the rug but eventually could only delay the process. Local press drummed up the news 24/7and a huge uproar was there in the parliament forcing the then Telecom minister to scrutinise the whole deal.

A probe proved that Swan Telecom is under a holding company of Reliance Group owned by Anil Dhirubai Ambani. Reliance being an existing Telecom service provider for various circles in different states of India has no right to own another Telecom company under a different name and operate in same circles or other regions. That would tantamount to serious conflict of interest.Within few months the media witnessed the change of name from Swan Telecom Etisalat to Etisalat DB. It seems Swan has sold its share to another company called Dynamix Balwas (DB). This is a company owned by Shahid Balwas. There are press reports and classified documents with home department pointing Shahid's deal with Swan and Etisalat is indirectly linked to Dawood Ibrahim's business interest in India and abroad. I presume my readers need no introduction to Dawood Ibrahim and his interests. Sources confirm Millions in Dollars have rolled in and out of India to complete the transaction. The deal is now under the scanner of Indian authorities.

The latest news is Mr. Shahid Balwas , MD and Vice Chairman of Etisalat DB was arrested few weeks back by CBI and currently being probed of the 2G scam links. Investigation suggests his aquittal may not happen  easily under the current circumstances since the then minister Mr. Raja himself is too under arrest and being probed of the scam links.  Governement under Dr. Manmohan Singh is determined to grab the culprits of the 2G scam and bring before the justice system to clear the blot in its white paper.

Etisalat has few options now. If it want to run a Telecom business in India, it has to quit its Pakistan operations completely (hope i am not cynical). Furthermore it should come out unscathed of its image from the imbroglio surrounding the business venture with DB Group. Etisalat should search for a new partner who is genuinely interested in doing business in India. If that happens we could see some pyrotechnics in the sky. But the developments suggest otherwise. Let us hope Etisalat may review the whole business model and think of starting from square one. It will be good for Etisalat in the long run as a corporate, its prospective clients and for the great nation India.

Antony Konnoth

bizsense.blogspot.com

SHOULD I CELEBRATE X'MAS OR JOIN THE MAJORITY?

December month fascinates me ever since I was in my diapers. Every year when the month pass through it gives me mixed emotions. Both happy and sad. I am happy that I could be part of a Global celebration and also cherish the birth of Jesus Christ being a Christian. I am sad because, it's the last few moments of the year which caution me of the upcoming challenges and reminiscence of the passing year.

It's been nearly 3 years now residing in Dubai and my wife reminded me of the gala celebration with all family members in town. In the last fall we couldnt merry with the whole members of the family . That is a strong reason for celebrating X'MAS this time. I couldn't resist much.

Children are agog with the festival mood and the first thing they insist me is to place an order for an indoor Christmas tree. A search in the nearby shopping malls made my nerve chill after looking at the price tag. I have decided to have a try at the local market for a cheaper version. A friend of mine guided me to the inner roads of Deira. After several attempts we could locate a retail shop selling decorative items. At one go you feel the items were dirt cheap. It amused me further on realising that a cramped shop of this sort is storing a hell lot of materials. All China made.

The sales man was insisting to buy some original stuff rather than the one which was displayed. He kept saying that the original stuff (kept in the godown) would be durable in the long run and its quality is much superior. But I insisted for a basic model among the items displayed. It would cost me only 1/4th of the price I have seen in the supermarkets. The sales man is not budging. Now he demands only a little higher for the so called original stuff than the cheap one which is displayed in the showroom. When he saw I am not relenting his next offer was tempting. Almost at par with the price tag of the Original item. Orginal stuff for the price of a cheap one. I was skeptical because the new item is also some Chinese stuff except the packing and the price has finally nosedived to half from what he has asked earlier. My friend winked his eyes and gave an agreement nod. I am sold. At least I should respect his suggestion . He has taken the pain of coming with me to an interior place for no purpose of him. With some weight lifting steps we could carry the pack and walk a few miles to reach our car. Thank god the weather was graceful and moderate.

Children couldn't resist the temptation for seeing the tree unfurled. In no time unwrapping is done and to my surprise the whole set need to be assembled from the scratch. When I dig through the stems I could see some broken pieces of balloons and decor foil papers. My intuition proved to be right. The tree was an used one but in a new carton pack. The sales guy was certain that I would not come back to his shop for an exchange weathering the climate carrying the heavy box and bothering the parking issues in Deira. My lawyer mind kept insisting for a retaliation but my common sense prevented to proceed further. My mind kept reminding me -It is not worth it. I would loose more money if I carry the stuff back.  I phoned him the other day but he defended with some petty excuses but had to surrender finally. I Just cautioned him firmly so that he will not continue the same Modus Operandi with others. Let it be my Christmas gift in disguise to him. After all Christmas is all about gifting. The best gift one can give is to forgive someone for a fault done intentionally or otherwise.

The whole incident prompted me to write this blog with a touch of business . Now a days the imported chinese items are flooded in the market. You could get anything from a portable and illuminated nativity set to self blinking stars for christmas. China is the largest exporter in the world. It has become the 2nd largest economy surpassing Japan recently. Despite its global dominance in exports it lack credibility as a democratic nation. The news about the nobel laureate Mr. Liu Xiaobo is still warm. He is under house arrest with no access to any one expect the disguised Chinese military men. All he did was he opposed the one party communist system in the country. He will celebrate the Christmas ( I guess he is not a christian) & New Year under surveillance and no freedom to visit or exchange greetings even with his close relatives. It still haunts me the portrait of Liu Xiaobo being kept at a chair as a symbolic presence at the 2010 Nobel price ceremony as his own government has prevented him from reaching the venue to accept the awards which was considered to be noble among all awards.

Julian Assange is a celebrity now. He is constantly harassed by several governments for publishing cable transcripts containing secret diplomatic messages. The Guardian reported the version of Assange -"Why punish the messenger instead of the the actual culprit?" is something to ponder seriously. He is on legal bail now for an offence purportedly created to chain him. Come what may Justice shall prevail. He has to wear an electronic jewellery all the time while on move which provides an indication of his movements. He has to report atleast once in day before the police. But he is provided a laptop. He will have his X'MAS within the four boundaries. Away from his own family and country men. His X'MAS is in limbo for what he has done to the journalist community. Reporting fearlessly and against the mighty US and its alliances.

Greece is still struggling to recover from the economic mess it had created in yester years. The Austerity measures implemented by the govement at the like of EU is showing no sign of improvement. The pictures appear now a days in the front page of international newspapers were alarming. The protesters clashing with government and the bleeding faces are a common sight these days. Spain is under scanner. Other EU members like Italy, Portugal and Belgium shall soon follow the suit. Christmas is still a pain for many of its citizens despite the fact  that they want to consider otherwise. Let peace be upon them.

A picture appeared in International Herald Tribune recently --An Irish lady selling all her belongings for a song was heart breaking and touching. She plans to migrate to other country.The economy has crashed. Once a dominant player in the international arena has succumbed to perils. Liquidity infusion by peer country members has found no avail.  Ms. Angela Merkel, the German Chancellor is against the bail out. How long a stronger nation can support the weaker and that too because of its own actions? She is quite right on her views. But others are not convinced. Can Ireland guarentee its citizens a fun filling christmas season? Only time will tell.

Let's forget these instance for a moment. Think about Palestine and Israel. Bethlehem, the birth place of Jesus Christ is surrounded by israeli forces. Huge wall seperate the Jerusalem from other regions. The famous church which was once the home ground of Christ is deserted. The restrictions put forth by the israeli authorites make the worship a ceremonial affair. Tourist who long and desire to see the holy land are scared to visit the holy place. It's a war like region. How can anyone celebrate the Christmas at this atmosphere?

I hope Mark Zukerberg will have a new way to celebrate this christmas. The social networking king might have got a different plan to celebrate. Bill Gates and his Melinda foundation is planning to have a Christmas celebration for the underprivileged class. Warren Buffet's(world's third richest man) plans is yet to be  announced. Carlos Slim, the Mexican billionaire ,the world's richest, still plays hide and seek game. Brad pit and Angelina Jolie are holidaying this season at an unknown location. Let's respect their privacy. After all they are celebrities in their own world.

Corporates are still in red and yet out of woods. GM has paid back all what they owe to the US government with some innovative business strategies. It took a downturn for the GM to think out of the box. BP is still struggling to settle the claims by those affected by the oil leak. It owes billions to US as compensation. Many of its assets are under hammer to settle the dues. Employers around the world are worried. Cash flow deficit is a daily topic in management meetings. Unemployment is the biggest concern faced by governments. The most distressing question, reported by Newsweek, is HOW WOULD THE COMPANIES HANDLE THEIR DEBT IN 2011? FT has reported that many of the corporates in US and Canada have cancelled their Christmas celebration this time and have asked the employees to do it on their own.

World poverty is rising at unprecedented levels. Let me not take this space to highlight as it is known to most of us. How can anyone celebrate Christmas peacefully? I have no clue.

I am neither a celebrity nor a corporate honcho to be compared. But as like any one who observes the economic situation I too live in a fear of uncertainty. But my family disagrees to part away with the celebration mood. They have their own reasons. They say why would anyone forfeit the celebration for others? After all one only reap what he sow. I had no satisfying explanations to offer. Christmas song from my system is playing aloud. Let me also join the gang and not spoil others mood. My inner mind keeps reminding me of the factual state.It is now in questioning mode. I may not have any answers and even if I have no one is interested to lend their ears.

Let the celebration continue. MERRY CHRISTMAS, To all my friends, Colleagues, well wishers and my bizsense blog readers.

Antony Konnoth
bizsense.blogspot.com

SEATTLE ORDINANCE- BIG THREAT TO YP COMPANIES IN US & GULF

SEATTLE ORDINANCE TO YP INDUSTRY -- GO GREEN OR OWN UP.


Finally, I have got a straight topic specific to my own industry to jot down few inputs with my legal pen. The topic may now have been an already notified subject to many of my colleagues and friends in the industry . This posting is solely intended to those who are interested in some serious readings to know in detail about the announced Ordinance in the US, limiting the reach and usage of Yellow Pages particularly in the city of Seattle  in Washington, and the likelihood of being implemented in other US states and finally its impact in the Gulf Asian regions.


City of Seattle is familiar to most of us being spotted as the Head Quarters of the corporate giant Boeing ( HQ Now in Chicago).This legislation Per Se could cost the yellow pages industry billions of Dollars. Furthermore it could even spread to other continents. I won't be surprised if a similar kind of legislation creeps into some of  the legislative domains of the Middle East countries in the near future.  Though it is cliché to say 'Middle East catches cold when US sneezes' the usage still amuse people.


SEATTLE ORDINANCE - A BACK TRACK  


US have an impeccable history as the paradise of right's activist and  freedom fighters. Anyone who is deprived by the acts or deeds of any other individual, state or business can sue them in the Court of  Law for an appropriate remedy and may reinstate the rights. Usually these kinds of actions are mostly initiated either by some activist group or politicians to gain popularity and recognition. The alternative step being, one can individually or by forming groups could approach the authorized representatives of the state or any Senate member for initiating draft legislation . Council members can also initiate these kinds of legislations citing the public interest involved. Once the final draft is made ( Around 14 drafts were prepared before finalizing the Seattle Ordinance) the paper is put forth in the Council for ratification. Once it gains the support of the majority it will be considered as the law in force either with immediate effect or later application . Environment is a popular issue now with many US politicians and they usually leave no stone unturned to achieve their objective. It is no surprise that the issue was taken up with full vigour and steam by the Seattle City Council. 


In the mentioned case, Seattle City Council has passed an Ordinance forcing the Yellow Pages companies to cut down the number of books being published / printed keeping in mind of the environmental concerns. The ordinance also imposes certain regulations and fees to yellow pages companies. It requires the publisher to pay $100 as license and $0.14 per book and $148 per ton towards advance recovery fees. What the legislation aims is to collect the cost of recovering, recycling and disposing of the old copies from the Yellow Pages companies once the new edition is released. The Seattle city council is trying to set up a model where the producer, rather than the community, pays for the cost of recycling the products. Books becoming muncipal waste and eventually reaching as landfill were a great concern with many states.


It is speculated that if this model is adopted, three of the major Yellow Pages companies in US like AT &T, Super Media & Yellow Book would end paying more that half a million dollars yearly as expense alone. Advance recovery fees would be $10 billion if other 20 major publishers in US join the fray.


A suit is filed in the district court of Washington by Dex One, SuperMedia and Yellow Pages Association (YPA) challenging the ordinance citing the violation of interstate trade and privacy rights of Seattle residents. Subsequent to this suite a new website http://www.yellowpagesoptout.com/  is also created by the association for providing the residents to opt out from the yellow pages distribution network. Those who prefer not to receive Yellow Pages annually can log on to the site and opt out without citing any reason or explanation. This brave move is intended to get a favourable decision from the judiciary though the final out come is uncertain. Judges have ample discretion on environmental matters. To please community watch dogs many publishers are now trying to recall their other language editions from the press. The Spanish language variants published until now by some US YP companies intended for the ethnic segment  got a huge blow below their belt. The grapevine is that the editions are now off press to save millions. 


Publishers have also started using new ink which is non toxic for the printing job. The selection of paper are now from wood chip pulp  intended to considerably reduce the mass felling of trees and eventually making the used paper easily recyclable and decomposable too. Yellow Pages users are divided on this issue. Many find online content satisfying their need and search requirements. But Majority still expect the yellow book on their desk as a reference source and possibly may be to continue experiencing the classic search method.


Winning a suit at the District Court of Washington may not be a  difficult task for the consortium but there is a high probability that its contentions will be rejected by superior Courts since major environmental issues are involved here. The strange part is that News papers and magazines are exception by law on this issue being the pillar of democracy and one indispensable to the society. They need not comply with the ordinance. Freedom of expression enshrined in the US constitution would come to their rescue.Yellow pages industry is worried, not because the product is extinct or bankable no more,but its organic growth is struck with impediments which are beyond its control and purview.


THE IMPACT OF THE SEATTLE ORDINANCE IN GULF 


Yellow Pages companies in Gulf Asian regions are closely monitoring the implications of the Ordinance. The issue may be debated in the UN once taken up by any member nation who relentlessly promote Green Environment. Many countries shall become the signatories in future. The compulsions from the international community may force other nations also to follow the suite. 


 UAE is spared for the moment-- being a non signatory to the treaty on the sustainable use of environments  and it Monarchic nature is surely a game stopper. Law applicable in UAE permits no one either Resident or Citizens of UAE to approach any Court here for developing this kind of law. They also cannot challenge the rule even if it is proclaimed as a decree at a later date. UAE doesn't have a comprehensive and written constitution like US or India. Fundamental rights are something unheard of. Public demand and  and compulsion are out of question since it has no audience here. 


The situation is both Good and Bad for Yellow Pages companies here. GOOD, for the simple reason that the yellow pages companies should waste no time to plan and develop a sustainable business model  favourable to the environment. It is BAD, since the profits and revenue are affected at least in the short term.


Be glad that the Print to On line transition is now gaining momentum in UAE before any decree is made in the line with or similar to SEATTLE ORDINANCE urging companies to comply with clean environment terms.Yellow Pages companies are aware of this and I'm sure will eventually adapt to the challenges in place. 


Antony Konnoth
bizsense.blogspot.com

QATAR BAGS FOOTBALL WC VENUE, NOW UAE EYES HOSTING OLYMPICS.

OIL & GAS JOKES ?


All of us knew QATAR was relentlessly trying for some big events to showcase its image to the world. Many say this was actually intended to show other Arab countries in the region. Qatar was predominantly down rated by fellow peers despite its GDP growth and gas reserves. The time has come for the nation to act. It showed up with a bang. World Cup football is coming to Gulf. Kudos to Al Thani family- the present ruling family of Qatar.


An event of this sort is the first of its kind in the region. Accolades were cabled from other Arab countries by their top honchos. Many had in fact restricted the appreciation only to some formal exchanges of words. International media aired some dissenting notes to the actual fallout. No doubt ,countries like England, US and Japan are dissapointed. British PM, Mr.David Cameron even flew with football icon Beckham for a last minute pitch but to end up in vain ( not for 2022).


Year 2022 is a long way to go for a sports event like this. Other contestants who were missed out in the race are up in arms. Knowing the corrupt and dubious track record of FIFA there are credible reasons to belive it. All what we could garner is that the deal is squared of with absolute majority favoring Qatar, barring very few others. FIFA is all out to award the event for this region. Reason being, it want to take football out of the traditional turfs. Qatar was a perfect choice. But we did not see this vigor and enthu in the past years when ALGERIA and EGYPT had tried for hosting it but failed miserably. Never mind.. Football lovers in the region are elated. Expats have no qualms. Let the game of football win.


But there are other issues for Qatar. Despite its money reserves and on bound economic factors the infrastructure is challenging. It took several years for the gulf nations to understand that Oil & GAS alone will not make a nation prosper. Global Image too is paramount. The event hosting is an image building exercise. At least 12 full fledged stadiums are required to conduct the round matches. Qatar has just 4 and  some with fewer facilities. They need to develop around 8 international stadiums from scratch. This is in addition to other practice match spots. On top of it the biggest challenge would be the scorching temperature. Qatar is really smart to convince the FIFA of its obligation to keep the temp below 27 degrees by installing cooling mechanisms inside the stadium. Technology is the King. There are unconfirmed reports that it had created a model stadium for the inspection of FIFA authorities. If these facts are to be believed, Qatar's 'never say die' attitude should be appreciated. It has dared to travel in an unknown path and left a trail for others to follow. It has banked on its experience too. Having hosted the under 19 foot ball world cup earlier also worked in favour for Qatar. We also cannot forget the adminstrative capability of Qatar while they conducted the Doha Asian Games. Almost $50 billion is budgeted for the world cup event and for other related business activites. Business is flocking to Qatar. All eying the multi billion dollar project annouced as part of the event.


All these success and efforts were ignored or sidelined in other parts of gulf region. The press too has taken sides.One of the major dailies of UAE, Khaleej Times did not even print the announcement in its front page. It has kept instead few columns in the sport page considering as a under rated news. Gulf news did the opposite. There was a front page news coverage with some stunning phots. But others restricted the news only to its editorials.


UAE should be in a dilemma. No second thoughts on that. The face of Gulf was expecting the event to miss the region by all means. The news was stunning. Another nation in this region has stolen the mantle to host an international event. This is good for football lovers but bad for nation like UAE atleast business wise. Tourism was predominantly focused to Dubai (business tourism), Muscat (Nature tourism) and Saudi ( relegious tourism). Sports tourism is something never ventured out or figured. UAE has recently started to explore this business model. Formula One (just concluded), International Cricket Matches ( Pakistan is the permanent opponent for any one day !), FIFA club matches ( starting soon) are some events in their kitty. More tourist would flow than in any other season when a sports event having substantial news making capability takes place. Hotel occupancy ratio is high than any other times. The rates are premium. They would make 3 times more money than in any other season. Other business opportunities are aplenty.


To counter this or not ,UAE is now weighing the possiblity of bidding for 2020 Olympics. One advantage is that the event shall take place in 2020, two years ahead of Qatar World Cup. The nation could take a first mover advantage. Olympics is for all and not restricted to just one sports. A global viewership is certainly guarenteed. Image make over is in place. All would vouch that UAE is struggling to keep its image with other GCC nations as the most vibrant and happening place. It can't digest another gulf nation taking the place once it has occupied and dominated. UAE may not have any animosity with her fellow nations. But its business case proves otherwise. It's a competitive world. Sustaining one's glory is an ever challenging job. UAE is simply exercising that option.

It just heard the good news from FIFA chief Mr. Sepp Blatter that Qatar could consider giving the opportunity for her neighbours in the region too for hosting some of the world cup matches. One or two matches in UAE? Well anything could happen.


All expats in this region is curious. They have sets their eyes glued to media for this. Let's hope both nations shall exibit some great sportsmanship for the world to cherish.


Antony Konnoth
bizsense.blogspot.com

Is CANADA finding foe in UAE or vice versa?

This is one big question among many gathering steam in the minds of many expats who are living in UAE. If the diplomatic sources are to be believed the issue is getting hotter as days goes by. Lately,Financial Times (FT) and other prominent international dailies has revealed some interesting facts which is worth pondering. I am sure many of us knew this information and the news before hand.


Etihad and Emirates being the top airline companeis in UAE were flying 3/7 to the Canadian capital. They were supposedly incurring substantial loss since flights were operating  only for  3 days in a week despite their full operational capacity. The crew and support staff has to locate in Canada even for those non operating days in a particular week and subsequently pay for their stay and bear operational expense. The airline companies were demanding in full steam for more landing rights for the rest of the days in a week. No doubt If they could garner the lost days to their productive list by flying they could perform much better. At least this the reason aired by Mr Tim Clark the president of the Emirates. I am convinced, it sounds a business case here. Ethihad doesn't beg to differ ( Let us hope Mr.James Hogan CEO- Ethihad, shall vouch for it). But Canadian authorities are not willing to budge. Let us presume that they have their own reasons.


UAE is upset as like any other nation in such a scenario. If defence sources are to be trusted UAE was providing a military kind of base for Canada in her land to accomplish some military committments put forth by NATO and UN. Not forgetting here the compulsion and consent of Uncle Sam (US). Now this facility stands withdrawn by UAE or atleast now in the process of declining further base/stay. Canada view this as retaliatory step by UAE for declining more landing rights to the two airlines.


Canadian PM Mr. Stephen Harper and foreign minister Mr. Lawrence Cannon have a dissenting view. Almost 27000 Canadian nationals residing in UAE are taking sides. At least many of them want Emirates and Ethihad to operate daily to Toronto and other locations. They might have not considered the position of Air Canada and the purported protectionist policy of the Canadian government. Convenience matters. Canadians are no exception! We agree.


ExIm and trading is effected now. UAE and Canada were regarded as long standing trading partners and the business transations are worth billions. The business community has started lobying for an amicable settlement. At least they know it their money is at stake than anyone esle.


The paramount question is can a nation decline the continuance of a military base of another country in its land allowed years back based on the common trust and other security reasons for some trivial reason like decling extra landing rights to its airline companies in the other country? Landing rights or Military base -  Which has more weightage? Let the prudent men decide.