EuroWire May 2015

Transatlantic cable

According Commission (FCC) data, in 2014 RUS awarded $228 million to improve telecommunications service for 83,000 rural customers. to Federal Communications

Mr Ausick wrote: “The issue is not so much that there are no buyers, but that Tesla has managed to step on its own toes as well as those of its potential customers. When the company introduced the P85D version of the Model S sedan last October, previous orders for the Model S were cancelled and new orders placed for the new version.” According to Mr Ausick, to o set the order cancellations Tesla raised its ordering fee of about $2,400 to $8,000. A requirement for a deposit of $40,000 when the car was ready for shipment to China was imposed. The Model S costs about $103,400 in China. Chinese buyers balked at the payment changes ”as the company’s China o ce had predicted they would,” wrote Mr Ausick – and orders began to dry up. Other reasons advanced for the poor showing include overly optimistic sales forecasts and the arrival of cars from the USA for Tesla stores in China that were never opened. Chinese management suggested selling those cars at 20 per cent discount and using third-party sellers to help unpack the inventory. But, Mr Ausick wrote on 247wallst.com , “Tesla headquarters apparently rejected both suggestions out of hand.” Washington follows through on its pledge to make a ordable high-speed broadband available to communities in rural areas In its 23 rd March announcement of the creation of the Broadband Opportunity Council, the White House noted that, with signi cant private investment, President Barack Obama’s goal of providing 98 per cent of Americans with high-speed fourth Generation (4G) mobile broadband had been reached. The Council includes over 25 government agencies and components. A particular concern for rural America was apparent in the concurrent announcement of $35 million in broadband infrastructure loans by the US Department of Agriculture (USDA). This spotlighted three projects that will improve broadband service in portions of rural Arkansas, Iowa and NewMexico. Southwest Arkansas Telephone will receive a $25 million loan to upgrade portions of a bre network and convert the remaining portions of a copper system to bre. In New Mexico, Mescalero Apache Telecom will receive a $5.4 million loan to upgrade portions of its system and provide bre service to approximately 50 per cent of its territory. The New Mexico loan has historical roots. It is the rst that USDA’s Rural Utilities Service (RUS) will have made under the Substantially Underserved Trust Area provisions of the Farm Bill of 2008. Those provisions amended the Rural Electri cation Act of 1936 to make funding available to areas that historically have had di culty receiving federal assistance. Over the past year RUS has held a series of outreach workshops around the country to help tribal (Native American/American Indian) communities access RUS broadband programmes. Iowa’s Minburn Communications is to receive a $4.7 million loan to upgrade its copper network to bre, and to provide subscribers with voice, broadband and video service. Telecom

Business

AWhite House initiative to curb corporate tax avoidance has prompted a surge in foreign acquisitions of American rms The law of unintended consequences seems to be operating in the matter of an action taken by the USA to prevent domestic companies from exploiting a loophole in the tax code that enabled them to sharply cut their federal tax bills. In September the US Treasury all but eradicated the tax-inversion deals whereby an American company could gain the bene t of a corporate tax rate lower than the current 35 per cent by acquiring a rival from a lower-rate jurisdiction and moving the combined group to that country. But this has had the perverse e ect of leaving many American groups vulnerable to foreign takeovers. In fact, there already has been a steep rise in takeovers. Citing data from Thomson Reuters, the Financial Times (London, UK) reported that, since the crackdown on tax inversions, some $156 billion in inbound cross-border US deals has been announced. This compares with $106bn in the same period bridging 2013-2014 and $81bn in that period a year earlier. Through the rst quarter of this year, foreign buyers announced $61bn worth of USA acquisitions, an increase of 31 per cent on 2014 to that point and the strongest start to a year for inbound cross-border deals since 2007, according to Thomson Reuters. (“Tax Inversion Curb Turns Tables on US,” 15 th March) Parsing the data on ft.com/intl , David Crow and James Fontanella-Khan in New York and Megan Murphy in Washington noted that “by far the biggest acquirers” have come from countries with lower tax rates, such as Canada and Ireland, which have announced $26bn and $22bn in M&A [mergers and acquisitions], respectively. This highlights the competitive advantage now enjoyed by their companies. Before, Germany and Japan accounted for the biggest buyers of US companies. † If the administration of President Barack Obama is feeling any chagrin over these results of the tax inversion initiative, it is not apparent. “The targeted anti-inversion action we took last year removed some of the economic bene ts of inversions,” a Treasury spokesperson told the FT reporters. “But the only way to completely close the door on inversions is with anti-inversion legislation, and we have consistently called on Congress to act.” But gridlock in Washington means that the call for a comprehensive overhaul of the tax code will almost certainly go unheeded. Meanwhile, several American companies – having stopped the repatriation of overseas revenues to avoid taxation at home – have built sizeable cash reserves outside the USA. It may occur to their managements that acquisition by a foreign company would give them ready access to their stashes. Dorothy Fabian – USA Editor

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May 2015