Thursday, January 28, 2010

Tata Comm eyes big gains in media space

S Kalyana Ramanathan / London January 29, 2010

Tata Communications yesterday announced the forming of a new division, Global Media and Entertainment Solutions, as a sequel to the takeover of the Mosaic platform from BT Group plc. It will invest $50 million over the next two years in the new service, a cloud-computing media management system.

The company said the new business could bring in $200-300 million annually over the next three to five years. The service is targeted at the entire spectrum of media customers, encompassing content creators, producers, post-production houses, digital media publishers, content service providers and TV channels, the company said.

Claude Sassoulas, the company’s managing director, Global Data Solutions-Europe, said the new lot of services will be targetted at emerging markets in India, China and South Africa, even as the company expands its reach in established markets in North America, Europe and Australia.

Tata Communications had, last week, announced the acquisition of BT’s Mosaic platform (for an undisclosed sum). This cloud-based system, it said, would help media companies and broadcasters globally manage their content more efficiently, while also offering potential cost saving. Though the acquisition price of Mosaic had not been disclosed, the company indicated the potential gains on account of this acquisition (and through its integration into the existing network) could be several times the cost of acquiring Mosaic.

Integration of Mosaic to its existing portfolio is expected to throw open opportunities it could not effectively tap earlier. The media and entertainment solutions portfolio of Tata Communications already has Video Connect and Satellite Broadcast services, that provide content delivery network (moving media files more efficiently, within all key players in the system), global IP network and managed hosting and storage services.

The company said broadcasters could expect savings from Video Connect’s flexible pricing scheme, as they could pick traffic direction and purchase for the exact bandwidth required for a specific amount of time and be billed by usage. “Video Connect’s on-demand and customisation capabilities also allow broadcasters to activate the service for special broadcasts and enable different feeds to be used for different time zones, so that revenue streams can be created from local advertising,” the company said.

Tata Communications’ current global infrastructure comprise advanced and largest submarine cable networks, a Tier-I IP network with connectivity to more than 200 countries, and nearly a million sq ft of data centre and collocation space worldwide.

The proposed $50 million investment will mostly be in software development and hardware to support ambitions in GMES, but does not include routine capex the company would invest in its global IP (internet protocol) infrastructure.

David Smith: Short tenure, lasting legacy

S Kalyana Ramanathan / New Delhi January 29, 2010

Smith’s financial acumen steered the troubled car maker through its toughest times in the recent past

David Smith, 49, is unlikely to remember January 25 fondly. It was the day he stepped down as CEO of Tata Motors’ owned Jaguar Land Rover (JLR) and surprised anyone following the Midland-based car maker’s progress through its most difficult times in recent history.

Smith’s abrupt departure was matched only by his equally unforeseen elevation to the post when his predecessor Geoff Polites died in May 2008. Over the next year and half, until he resigned without any officially stated reason,

Smith steered JLR through some very tough times.

There is a general agreement among industry observers that CEO exits need not be always ceremonious. But in Smith’s case the timing caught everyone by surprise. He could have stayed until he saw the company’s bottomline back in the black.

Some believe that Smith’s forte in finance also became his nemesis, at least in JLR. Seasoned industry colleagues cautiously guess that JLR, having managed to tidy up its finances in the past few months, is now in need of a head who can manage its production and, more importantly, marketing. Smith’s resume does not say much on these accounts. He has worked within the Ford group since 1983 and was in finance and strategy for a good part. Before his promotion to the CEO’s office he was finance director.

Nevertheless, Smith’s short tenure as CEO of JLR has been eventful. The year and half ending December 2009 was financially the most challenging time for JLR since the global economy went into recession, with luxury and premium car makers suffering more than their fair share of agony. From a profitable company (when Ford sold it to Tata) JLR became a loss maker, pulling down Tata Motors’ balance sheet as well. Money was drying up and the company was badly in need of funds. A £340 million loan from European Investment Bank fell through as the UK government demanded its pound of flesh to provide its guarantee. Smith stood his ground and refused to deal with the government on any terms other than regular commercial terms. His financial acumen was put to its most difficult test when he helped JLR emerge from the abyss, clutching £670 million loans from private banking sources in India and Europe.

Smith also managed to engage the unions in constructive discussions until the final rounds of talks earlier this month broke down. During his tenure he brought home some major goodies that will have a great long-term impact on the company’s future. A pay freeze, plans to close one of its three major plants by 2015 and plans to step up productivity without major increase in work force were some of the notable achievements. All this when voluntary job cuts (as opposed to compulsory redundancies) will continue in the background leading to the possibility of a lower work force in the coming years.

On January 25, JLR announced that its latest talks with the unions had broken down as both sides disagreed on issues surrounding minimum wage levels for fresh recruits and pensions. A few hours later, JLR also announced Smith’s resignation, forcing local media to link the two events. Company insiders, however, disagree. The unions considered him a fair man, always open, accessible to any colleague with genuine concerns, and most importantly transparent. Some believe that despite his short tenure, Smith “book-ended” a significant phase in JLR’s history with his ability to shore up funds to secure the company’s future.

His next career move is not known yet. Some believe, he might have received a call from the mother ship and could be going back to Ford.

For now, JLR’s day-to-day affairs will be managed by Tata Motors’ Vice-Chairman Ravi Kant. Until Tata Motor’s finds Smith’s permanent replacement it would be fair to say that the Tata’s stated policy of maintaining an arm’s-length distance from JLR’s day-to-day management just got a bit shorter. After all Kant, unlike Solihull-born (Land Rover’s home) David Smith, is not from UK’s Midlands.

Monday, January 25, 2010

JLR mgmt, unions disagree on terms of new hires

S Kalyana Ramanathan / London January 26, 2010

Six days of meetings over two weeks between Tata Motors’ Jaguar Land Rover (JLR) and its workers’ union ended without agreement on terms of employment for new hires.

A JLR spokesperson said, “Jaguar Land Rover regretfully confirms that these discussions have come to an end without agreement being reached.”

“We don’t discuss the content of private meetings, although we do keep our employees informed,” the spokesperson added.

The meetings between the union (Unite) and JLR’s management followed the new business plan announced by the company in September, under which the company it said it was planning to invest £800 million in new technology and also rationalise some its production centres in the UK’s midlands.

The company had also promised that the rationalisation of production would not result in any compulsory job losses and, in fact, would only add 800 jobs by mid-2010.

The latest discussion was around the terms and conditions that would bind new recruits in the company, over which the parties disagreed.

“In September 2009, Jaguar Land Rover announced a new business plan designed to significantly increase global competitiveness, drive growth and sustained profitability, and respond to the challenges of climate change. The discussions with trade unions representatives have focused on changes to terms and conditions for future new hires to the company to better align with the requirements of the business plan,” JLR said.

Under the new business plan production of the new Range Rover will start by 2011, the preparation for which will commence by the middle of next year. Apart from the new Range Rover, the company also proposes to develop a new lightweight sedan, sports cars and sports utility vehicles and “electrification technology” (to produce hybrid cars).

CEO Smith quits JLR

The Tata Motors-owned JLR confirmed on Monday that CEO David Smith, 49, had stepped down from his post with immediate effect. The company would soon announce his replacement. Smith was made CEO of JLR in June, 2008, after Tata Motors completed the take over of JLR.

“The company would like to thank David for his efforts in the role and for his service over many years,” JLR said in a statement. The company did not provide any specific reason for Smith’s sudden departure.

Tata Motors Vice-Chairman and former managing director Ravi Kant, who is also a director of JLR, will assist with the handover of Smith’s duties and assume day-to-day responsibilities of the CEO until a permanent successor is announced. Smith had joined Ford Motor Company (the previous owner of JLR) in 1983 and had held numerous strategy and finance positions.

Cadbury accepts $19.7bn Kraft offer

S Kalyana Ramanathan / London January 20, 2010

The board of UK’s leading confectioner Cadbury Plc today accepted the final takeover offer of US-based Kraft Foods Inc at £11.9 billion ($19.7 billion), ending a six-month resistance and putting on course the creation of the world’s largest confectioner. According to the final offer, Cadbury shareholders will get 840 pence a share, including 500 pence in cash and rest in stock.

Cadbury has agreed to pay a “break fee” of £117.7 million if it withdraws the recommendation. In August 2009, Cadbury rejected Kraft’s 745p-a-share takeover bid, which valued the confectioner at £10.2 billion ($16.3 billion, or Rs 79,000 crore).

Kraft still has to convince Cadbury’s majority of the shareholders to accept the deal by February 2. The deal is subject to counter offers from other suitors like Hershey and Ferrero SpA, with January 25 set as the deadline.

Irene Rosenfeld, chairman and CEO of Kraft Foods, said: “We have great respect for Cadbury’s brands, heritage and people. We believe they will thrive as part of Kraft Foods. This recommended offer represents a compelling opportunity for Cadbury shareholders, providing both immediate value certainty and upside potential in the combined company. For Kraft Foods shareholders it transforms the portfolio, accelerates long-term growth and delivers highly attractive returns, while maintaining financial discipline.”

Roger Carr, chairman of Cadbury, said: “We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values and people throughout the world. We will now work with the Kraft Foods’ management to ensure the continued success and growth of the business for the benefit of our customers, consumers and employees.”

Kraft said the purchase would result in at least $675 million in annual cost savings, $50 million more than it had previously estimated, and give the company leading positions in emerging markets, including India, Brazil and Mexico. The purchase should close mid-February, Kraft said.

The offer was accepted amid fears that there might be job losses for Cadbury. It employs 45,000 people in 60 countries, with 5,600 staff at eight manufacturing sites in the UK and Ireland, as well as its Bournville factory near Birmingham. Sky News reported that Prime Minister Gordon Brown had moved to reassure Cadbury workers that their jobs were safe, after the company agreed to the US takeover.

The successful bid by Kraft for Cadbury marked a “very sad day for UK manufacturing”, said Unite, the union of Cadbury, today. Kraft is said to have persuaded large institutional shareholders that an increased bid for Cadbury was enough to swap a 200-year history of growth and independence for a place within the conglomerate’s growing portfolio. Unite said the bid, an estimated £12 billion, and the continued exclusion of workers and key shareholders from the takeover consultation, meant its concerns for Cadbury’s future and the future of nearly 7,000 workers in the UK and Ireland very much remained.

Jennie Formby, Unite’s national officer for food and drink, said: “A successful, iconic, independent UK brand will now be owned by a giant company with massive debt. We have real fears about how Kraft will repay its debt, particularly as it has ratcheted up its offer further to purchase Cadbury. Whatever good intentions Kraft may have towards Cadbury’s workforce, the sad truth is that there will be an irresistible imperative to pay down their debt, and this raises real fears for jobs and investment in this country.”

He added: “We will now be seeking urgent meetings with the senior management of both Kraft and Cadbury for guarantees over jobs and sites in the UK and Ireland to put our members’ fears at rest,” Formby said.

Cadbury considers India as one of its most important markets in its global operations. The £5.4-billion company, which operates out of 60 countries, names India as one its strongest growth drivers among other markets like the US, UK, Australia, France, Mexico, Canada, Brazil, Japan, South Africa and Turkey. Recent investor statements have shown that primary growth for Cadbury in Asia has come from India, with Asia as a market contributing 6 per cent of its total revenues but registering growth at 12 per cent a year, while overall growth has been 7 per cent. It is yet to make strong inroads to China.

Lazard Ltd., Centerview Partners, Citigroup Inc., and Deutsche Bank AG are advising Kraft on the deal. Cadbury has Goldman Sachs Group Inc., Morgan Stanley and UBS AG on its side.

Monday, January 18, 2010

Tata acquires Mosaic from BT

S Kalyana Ramanathan / London January 19, 2010

Tata Communications announced today an agreement to acquire the Mosaic business of the BT Group (formerly British Telecom).


Mosaic is a web portal-based on-demand digital media management platform that manages content and workflow from production to distribution across market ecosystems.

Details of the deal, including the acquisition cost have not been disclosed. The unaudited value of the gross assets that are the subject of this transaction was £0.5 million (Rs 3.7 crore) on September 30, 2009, a release from Tata Communications said.

The Mosaic business helps media customers improve cross-enterprise content creation, management and multi-format delivery. It is targeted at the entire spectrum of media customers encompassing production houses, emerging digital media publishers, content service providers, and TV channels, the company said.

“The acquisition of the Mosaic platform strengthens our global media and entertainment portfolio, with powerful cloud-based digital media management applications that can be accessed over the Web. This enhances our existing portfolio of services that we are offering to the media and entertainment sector” said Vinod Kumar, President and COO, Tata Communications.

Sunday, January 17, 2010

Corus' Teesside plant gets reprieve of few weeks

S Kalyana Ramanathan / London January 17, 2010

Plant management, union agree to continue operations for at least three weeks beyond the end of January.

The Tata Steel-owned Corus Teesside Cast Products (TCP) plant, scheduled to be mothballed by the end of January, will be run till the end of February or till the raw material on the site has been used completely, whichever comes first.

A statement by the plant’s management and the union said: “Corus will place internal orders on TCP in order to give at least three weeks of continued operation beyond the end of January. During this time, the unions and Corus will jointly explore further opportunities to continue steel-making on Teesside.”

Community Union General Secretary Michael J Leahy said: “These additional weeks will provide valuable time to find an alternative future for steel-making on Teesside. Tata-Corus needs to be open-minded to all possibilities as the future of an entire community depends on its actions in the coming weeks.”

The Community Union said it was considering an industrial solution for securing the future of the plant, which the steel maker wants to partially shut. “Our focus is on Tata-Corus — this is an industrial problem. If Tata-Corus does not start talking honestly about alternatives, we may seek an industrial solution,” Leahy said.

In May 2009, a consortium of four buyers withdrew from a 10-year buying contract with Corus, forcing the steel company to consider the option of mothballing the plant. The contract, which was to end in 2014, would have kept the plant running at 80 per cent capacity during its tenure.

In December, just days before Christmas, Corus announced that it was running out of options and would mothball the plant by the end of January, 2010. The unions, after negotiating with the management, have bought additional three weeks to run this plant until all raw material (mostly iron ore) on the site is exhausted.