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Etisalat drags MTN, NCC to court

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Telecommunication company, Etisalat, has dragged the Nigerian Communications Commission before a Federal High Court sitting in Lagos State over claims that the South African telecommunication company, MTN, has been given market advantage over it.

At Tuesday’s proceedings, counsel for Etisalat, Aanu Ogunro, appeared before Justice Mohammed Idris with an application seeking the leave of the court for the suit to be heard during the court’s ongoing annual vacation.

Joined as a co-respondent with NCC in the suit is MTN.

Ogunro, while urging the judge to hear the suit, said it was urgent, claiming that if the decision of the NCC in favour of MTN was not reversed, it posed a threat to the business survival of Etisalat.

“My lord, we have a motion ex-parte for leave to ask for the judicial review of the decision of the first respondent.

“The urgency in this matter is that the first respondent has made certain decisions that, if not urgently addressed, will affect the business of the applicant and it is capable of eroding the capital and the business of the applicant within a very short time,” Ogunro said.

After hearing the lawyer, the judge granted the application to hear the suit during vacation and thereafter adjourned till August 3 to take the substantive application.

Etisalat, in the main suit, is seeking a review of a decision said to be recently taken by NCC allowing 30 per cent differential between MTN’s off-net and on-net retail mobile voice tariffs.

According to Etisalat, with the said 30 per cent differential between its off-net and on-net retail mobile voice tariffs, MTN had been able to create what is called a ‘calling club,’ an example of which is its ‘Family and Friends’ promo.

Etisalat is contending that MTN’s ‘Family and Friends’ promo, which offers a call rate of 11 kobo per second to eight MTN subscribers and two non-MTN subscribers, is posing a threat to its business survival.

It explained that the promo, which it claimed was launched in violation of NCC’s regulation, had aided MTN to leverage on its size to restrict outgoing traffic to smaller operators by pricing on-net tariffs lower so as to make off-net calls unattractive.”

Etisalat, however, claimed that this 30 per cent differential in on-net and off-net retail mobile voice tariffs granted MTN by NCC was a breach of NCC’s regulation tagged the Determination of Dominance in Selected Communications Markets in Nigeria.

The DDSCMN,  Etisalat said, was issued by NCC on April 25, 2013, following a study it conducted in 2012.

According to Etisalat, NCC had, following its 2012 study, discovered that MTN was the dominant operator in the retail mobile voice market segment of the telecommunication industry in Nigeria and that it maintained a wide differential of up to 300 per cent between its on-net and off-net retail voice tariff, which was not favourable to its competitors.

Following this discovery, the plaintiff said NCC directed that MTN should not operate with any differential between its on-net and off-net tarriffs  because such would substantially reduce the competitive capacity of other telecommunication service providers in the country.

Etisalat, however, said contrary to this earlier directive by NCC, MTN embarked on its ‘Family and Friends’ promo, which encouraged the creation of a calling club to the business detriment of the competitors.

Etisalat explained that when it realised that MTN had launched its promo, it wrote several letters, including one dated February 28, 2015, to NCC to complain but NCC refused and failed to compel MTN to immediately withdraw the aforesaid ‘Family an Friends’ tariff option.

It, however, said that NCC later wrote a letter dated April 14, 2015 to the plaintiff, disclosing that it had given MTN 30 per cent differential in on-net and off-net tariffs.

But Etisalat is contending that such leverage given by NCC to MTN would not allow the healthy competition within the telecommunications industry in Nigeria to be sustained.

It is therefore seeking a judicial review of the said decision by the NCC.

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BUSINESS

Dow futures drop 300 points as investors assess Fed update

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Stock futures fell early Thursday after the Dow Jones Industrial Average and S&P 500 turned lower overnight following a Federal Reserve update by chair Jerome Powell, at the conclusion of its two-day meeting.

Futures tied to the Dow declined 311 points, or 0.91%, retracing some of the earlier declines of nearly 500 points. S&P 500 futures and Nasdaq 100 futures slipped 1.12% and 1.36%, respectively.

Some tech shares were higher in extended trading, after continued swings in the regular session. Netflix jumped more than 4% on news that Pershing’s Bill Ackman bought 3.1 million shares. Tesla gained almost 3% following a strong earnings report. Meanwhile, Intel lost 2%, despite strong earnings.

In regular trading, the Dow ended the day down 129 points, after gaining more than 500 points at one point, following the Fed update. The S&P 500 lost 0.2% and the Nasdaq Composite was little changed, with a boost from Microsoft’s post-earnings gain.

The week’s volatility continued on Wednesday and stocks took a turn lower after the Fed concluded its two-day meeting and signaled the central bank would hikes rates to fight persistent inflation. Powell said there’s “quite a bit of room” to do so before hurting the labor market. The benchmark 10-year Treasury yield climbed above 1.8% following his remarks.

“While offering some clarity on how the Fed would begin the process of removing policy accommodation, the outcome of the meeting fell short in providing the needed guidance on the timing and magnitude of the shift in policy,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.

Some investors have started to bet on as many as five rate hikes this year, following Powell’s press conference. Uncertainty about the timing and magnitude of the Fed’s plans to tighten monetary policy had been building since the December meeting.

“Today’s meeting has market participants fully convinced that a March hike is certain, but with Chairman Powell not making any timing commitments, the door is slightly open for a slower moving Fed,” Ripley added.

Upholdings’ Robert Cantwell said the markets experienced a relief rally following Microsoft’s strong earnings report Tuesday night, which appeared to be a “good bellwether” for social media, gaming, software and other Nasdaq categories before the Fed update.

“The market in our view is totally overshooting and losing its mind, creating great opportunities for long term growth investors to snap up lots of great shares because, interestingly, it hasn’t really affected companies that actually carry debt,” Cantwell said of the Fed rates. “Since the end of last year the market has been most aggressively discounting companies that are going to generate more cash in the future than they’re generating today… We’re a little upside down now.”

Thursday is a packed morning for earnings, with Mastercard, Deutsche Bank, Blackstone, Southwest Air and JetBlue all scheduled to report quarterly results before the bell. Danaher, Valero and Northrop Grumman are also set to report.

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European markets set to plummet at the open as investors react to Fed decision

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European stocks are expected to plunge at the open on Thursday as global markets react badly to the latest monetary policy decision from the U.S. Federal Reserve.

The U.K.’s FTSE index is expected to open 147 points lower at 7,323, Germany’s DAX down 379 points at 15,071, France’s CAC 40 down 175 points at 6,804 and Italy’s FTSE MIB 675 points lower at 25,907, according to data from IG.

Global markets are reacting badly to the Federal Reserve’s indication on Wednesday that it could soon raise interest rates for the first time in more than three years.

The Fed’s policymaking group said a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming. It would be the first increase since December 2018.

The post-meeting statement from the Federal Open Market Committee did not provide a specific time for when the increase will come, though indications are that it could happen as soon as the March meeting. The statement comes in response to inflation running at its hottest level in nearly 40 years.

U.S. stocks initially rallied Wednesday even after the Federal Reserve pointed to an interest rate hike coming soon but overnight sentiment has changed.

U.S. stock futures fell Wednesday night; futures tied to the Dow erased earlier gains and declined 398 points, or 1.17%. S&P 500 futures and Nasdaq 100 futures slipped 1.35% and 1.57%, respectively.

Asia-Pacific markets fell across the board on Thursday overnight. Japan’s Nikkei 225 fell 3.3% while the Topix was down 2.3%. Over in South Korea, the benchmark Kospi dropped 3.13% and in Hong Kong, the Hang Seng index and the Hang Seng Tech index dropped 2.56% and 4.61%, respectively. Chinese mainland shares also declined.

Earnings in Europe come from Deutsche Bank on Thursday, as well as Unicredit, LVMH, SAP, Banco Sabadell, easyJet, Diageo and STMicroelectronics.

Renault will provides strategic update on the Nissan/Mitsubishi alliance and, on the data front, Germany’s GfK consumer sentiment figures are due.

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Federal Reserve points to interest rate hike coming in March

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Facing both turbulent financial markets and raging inflation, the Federal Reserve on Wednesday indicated it could soon raise interest rates for the first time in more than three years as part of a broader tightening of historically easy monetary policy.

In a move that came as little surprise, the Fed’s policymaking group said a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming. It would be the first rise since December 2018.

Chairman Jerome Powell added that the Fed could move on an aggressive path.

“I think there’s quite a bit of room to raise interest rates without threatening the labor market,” Powell said at his post-meeting news conference. After being up strongly earlier, the major stock market averages turned negative shortly following Powell’s pronouncement.

The committee’s statement came in response to inflation running at its hottest level in nearly 40 years. Though the move toward less accommodative policy has been well telegraphed over the past several weeks, markets in recent days have been remarkably choppy as investors worried that the Fed might tighten policy even more than expected.

The post-meeting statement from the Federal Open Market Committee did not provide a specific time for when the increase will come, though indications are that it could happen as soon as the March meeting. The statement was adopted without dissent.

“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the statement said. The Fed does not meet in February.

In addition, the committee noted the central bank’s monthly bond-buying will proceed at just $30 billion in February, indicating that program is expected to end in March as well at the same time that rates increase.

There were no specific indications Wednesday when the Fed might start to reduce bond holdings that have bloated its balance sheet to nearly $9 trillion.

However, the committee released a statement outlining “principles for reducing the size of the balance sheet.” The statement is prefaced with the notion that the Fed is preparing for “significantly reducing” the level of asset holdings.

That policy sheet noted that the benchmark funds rate is the “primary means of adjusting the stance of monetary policy.” The committee further noted that the balance sheet reduction would happen after rate hikes start and would be “in a predictable manner” by adjusting how much of the bank’s proceeds from its bond holdings would be reinvested and how much would be allowed to roll off.

“The Fed’s announcement that it will ‘soon be appropriate’ to raise interest rates is a clear sign that a March rate hike is coming,” noted Michael Pearce, senior U.S. economist at Capital Economics. “The Fed’s plans to begin running down its balance sheet once rates begin to rise suggests an announcement on that could also come as soon as the next meeting, which would be slightly more hawkish than we expected.”

Markets had been anxiously awaiting the Fed’s decision.

Investors had been expecting the Fed to tee up the first of multiple rate hikes, and in fact are pricing in a more aggressive schedule this year than FOMC officials indicated in their December outlook. At that time, the committee penciled in three 25 basis point moves this year, while the market is pricing in four hikes, according to the CME’s FedWatch tool that computes the probabilities through the fed funds futures market.

Traders are anticipating a funds rate by the end of the year of about 1%, from the near-zero range where it’s currently pegged.

Fed officials have been expressing concern lately about persistent inflation, following months of insisting that the price increases were “transitory.” Consumer prices are up 7% from a year ago, the fastest 12-month pace since the summer of 1982.

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