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Microsoft Buys Skype; New Technology Bubble?; Refugee Crisis in Libya

Aired May 10, 2011 - 16:00:00   ET


BECKY ANDERSON, HOST: Dialing up a multi-billion dollar deal -- Microsoft snaps up Skype, but is it worth the price tag?

Remember the dot-com boom?

Well, a decade on, could we be looking at another tech bubble fit to burst.

Plus, target Tripoli -- NATO hits the Libyan capital hard after more die desperately trying to flee the fighting.

And the ugly side of the beautiful game -- FIFA members hit back over new claims of corruption.

These stories and more tonight as we connect the world.

Well, it's a deal and it is a big one. In a surprise move that has got the tech world talking, Microsoft has bought Skype for $8.5 billion. Well, it's a hefty price tag, the most that Microsoft has ever shelled out in an acquisition. the big question is why?

Maggie Lake kicks off our coverage this hour.


MAGGIE LAKE, CNN BUSINESS CORRESPONDENT: Some in the tech world say Microsoft had no real choice but to go after Internet phone giant, Skype. Skype may be a money losing operation that has yet to generate substantial revenue, but its service is wildly popular. It has more than 140 million active users each month. In the words of one analyst, "The deal gives Microsoft a much needed kick start," as it battles to keep up with archrivals in the online world.

In fact, reports say Google and Facebook were also actively pursuing Skype for some kind of merger or partnership in recent months.

At today's press conference, Microsoft CEO, Steve Ballmer, said the opportunities for both companies to change users' computing and telecom experience is great.


STEVE BALLMER, MICROSOFT CEO: People do have one life. And the ability to call somebody from or communicate with somebody, participate in a meeting with people who work in your business and who don't work in your business, who are in your PTA and who you haven't met before, we want to stitch together the world. And we have big customer bases that we can connect in a way that will add value to, I think, all members of the community.


LAKE: The operating word for Microsoft in this deal is synergy. Microsoft can use Skype technology to give its Xbox games and Windows Mobile phone software more of the so-called cool factor, which many Microsoft products conspicuously lack.

The deal should also give a boost to Microsoft's own Internet telecom service, Link.

Skype's users may be asking what changes, if any, will come to their accounts once this deal is complete?

Analysts we talked to say Microsoft is certain not to make any major decisions that would alienate Skype users.

Microsoft says it is committed to supporting all non-Microsoft Skype platforms. And Skype is certain to remain a free service, although Microsoft may try to develop new, money generating services in the future using Skype technology, like group teleconferencing.

Maggie Lake, CNN, New York.


ANDERSON: All right, so those are the details of the deal, just one in a long line of tech acquisitions for Microsoft.

Let's take a look at what it's been up to, shall we?

Hot Mail, before today, it has acquired Hot Mail, paying half a billion for that nugget.

Before that, Bungie Software was one of its acquisitions. That was a coup. It repurposed the popular Halo game for Xbox.

MultiMap, you'll remember that one. This is the deal here. It became Microsoft Maps and Bing Maps.

And PrimeSense, 3D sensing technology for Connect, which works with Xbox.

Now, you heard earlier that the other great tech mover and shaker, of course, is Google, out there these days also circling Skype.

Let's take a look at what's in its stable.

Well, Android -- remember this one?

Well, it's -- not much was made of the acquisition of this mobile operating system at the time. But there was a lot made of this one. This was YouTube, of course.

Do you remember that one?

It speaks for itself, $1.65 billion in stock.

Picasa, another one, $4.7 million, a niche organizer. And Grand Central, the services that, of course, became Google Services, competitive, of course, to Skype.

Well, Microsoft has, in recent years, really only concentrated on buying smaller companies, which makes this deal even more of a surprise. It wasn't alone in chasing Skype. There is clearly an appetite out there for tech stocks rekindling decade-old memories of the dot-com boom and bust and the inevitable question, are we looking at another technology bubble fit to burst?

Well, I'm joined by two guests to help us out with this tonight.

Eric Jackson, founder and managing member of investment firm, Iron Fire Capital. Eric joins us from Toronto in Canada.

And from "The Financial Times" in New York, columnist Robert Armstrong.

Before we get to the bigger picture here, guys, the inevitable question here and the unanswered one, of course -- and I'll put it to you, Eric, first, is how do Skype assets work for Microsoft?

How do you justify the price?

ERIC JACKSON, FOUNDER, IRON CAPITAL: Well, I think it's very clear that Microsoft is in a different situation than most companies, in that it has an enormous cash horde. This is a company that had $50 billion on its balance sheet at the end of March. It was roughly double what it was 10 years ago, during the dot-com days.

And what's extraordinary about Microsoft is that it's generating cash at an even quicker rate.

So in the -- in the quarter that ended at the end of March, the three months, January through March, Microsoft made more just from its operations in terms of the cash that it generated...

ANDERSON: All right...

JACKSON: -- than what they have paid for Skype.

So this is a drop in the bucket for -- for Microsoft.

ANDERSON: Robert, agree, briefly?

ROBERT ARMSTRONG, "FINANCIAL TIMES" COLUMNIST: Yes, I think that's right. If you look at Microsoft's cash pile, there's no question that an $8.5 billion acquisition means nothing. But that doesn't mean $8.5 billion is a small number and it doesn't mean that Skype is worth $8.5 billion. It just means Microsoft is easily able to spend that much.

ANDERSON: All right. The wider issue, of course, here is this. Ten years after what was a spectacular bursting of the dot-com bubble, are we looking at a repeat performance, chaps?

I just want to take our viewers through some of the 2000 bubble deals, let's call them those.

Webvan, the online grocer, went from being a billion dollar company in 1999, you'll remember, to bankruptcy in less than two hours later -- 4,500 employees losing their jobs as a result. later took over the Webvan name.

You might also remember online fashion retailer, It also launched in 1999. Slow sales forced the Web site to go belly up before 2001.

And, remember that, the online travel service?

It's still around. It was worth more than a billion dollars at its launch in 2000. The company lost two thirds of its value in less than a year and was bought out by another travel Web site shortly afterwards.

If there is one thing you can be sure of, guys, it's that stock investors, of course, have short memories.

Have we learned anything in the past decade, given the numbers that we're seeing now, Eric?

JACKSON: Well, I -- I think there's almost now a -- we've swung the only way and there's this hyper sensitivity to bubbles that I think is just off base.

I think what people forget about bubbles is that bubbles take a long time to form before they eventually pop. And so I think we're being really too quick to call the end of -- of what's been gone -- going on only for two years, since the stock market bottomed, remember?

The dot-com bubble really was -- was building for five-and-a-half years. The U.S. housing bubble really didn't -- didn't burst for seven years after it got some momentum behind it.

So I -- I just don't see the evidence to date that we are in a state where things are about to explode. Yes, $8.5 billion is a lot of money for -- for Skype. But keep in mind, you know, remember back in the -- in the '90s, when one of the dot-coms,, that was owned by the -- the flash entrepreneur, Mark Cuban, was acquired by Yahoo!. That was a $6 billion deal. But at the time, had $23 million in annual revenues.

Skype has almost a billion dollars in animal -- annual revenues. So this is -- these are completely different orders of magnitude that we're talking about...

ANDERSON: And, a...

JACKSON: Once we see the Pets.coms and the -- the Boo.coms coming back, then we can worry. But until then...

ANDERSON: All right...

JACKSON: -- I'd say everybody should calm down.

ANDERSON: All right, Robert, we're seeing the money, of course, coming in from not just the shareholders, big investors, but mom and dad investors, as well. Just last week, of course, China's answer to Facebook, Renren, went scouting for money, $740 million, I think, it raised. Now online professional networking company, LinkedIn, it's looking at an IPO, looking at $32 to $35 each there.

But there will be people out there saying hang on a minute, hang on a minute, there's -- there's a lot of companies out there who haven't proved their worth yet. I know most of them are energy some money, but they're not energy a lot of money. And we're looking at multi-billion dollar deals.

Are you concerned?

ARMSTRONG: I would -- I would say there are localized areas of concern. I -- I would agree with Eric this far. What we've seen is not on the scale of 2001, but we are seeing specific areas in the market where valuations have shaken loose the fundamentals.

So I think you put your finger on two areas, the -- exactly the right two areas. I think Chinese stocks, especially Chinese technology stocks, are wildly overvalued. And the social networking valuations we've seen, both in the public markets and, you know, the valuations bandied around about private companies, you know, clearly, they're "show me" stories. And there's err -- there's -- there's reason for concern there.


ANDERSON: All right...

ARMSTRONG: -- I agree with Eric, this ain't 2001. We're just getting there.

ANDERSON: Eric, you're in the business of getting people to invest in -- in -- in tech companies. I mean, you've been involved in a hedge fund which does exactly that.

If you had one piece of advice for people out there tonight who are looking at what's going on now and thinking, should I jump in, what would it be?

JACKSON: Well, I think you definitely do have to do your homework. I mean I think every company is different. Every -- you know, not even -- even within that particular geography like China, I think there are huge differences between a Renren, for example, that -- that you just mentioned, that had a successful IPO last week, and the much more mature and, in my view, a well established company, like Siena (ph), which is operating in the same social networking space over in China.

So, it -- you can't rely on simplistic company descriptions. You should be doing deep due diligence yourself or you should be relying on somebody else who's doing that deep due diligence for you.

ANDERSON: We're going to have to leave it there, guys.

We thank you very much, indeed, for joining us.

We could go on all night. Maybe another time.

Thank you, Eric, Robert, your experts tonight.

Well, to get an idea of the appetite out there, just take a look at the -- the top brands 100 list. It's dominated by tech company, Apple, which now leads the pack. Its value has jumped 84 percent in the past 12 months.

Troubled Google, which is down 2 percent, though, still in second spot and worth over $111 billion.

Amazon makes the cut. It's up 37 percent.

Facebook, though, of course, was by far -- far the fastest growing company, up a staggering 246 percent and now worth more than $19 billion.

Amazing stuff, huh?

Moving on, risking it all to get away -- vessels overcrowded with refugees flee the carnage in Libya. Now the U.N. is urging international boaters to give them a hand.

And later this hour, the innocent inmates -- we go to visit South African kids in jail with their mothers.

Stay with us.


ANDERSON: Hundreds crowding onto a small boat, desperately trying to escape from the violence in Libya. Well, you've seen it turn to tragedy already. Now the U.N. is trying to get international sailors to keep an eye out for trouble.

Ahead, we're going to look at the disasters and what can be done to avoid them.

I'm Becky Anderson in London.


A look at the other stories, of course, that we are following for you this hour.

And Pakistan will allow U.S. officials to question the three wives of Osama bin Laden. But the Pakistani interior minister did not say when or where those interviews will take place. All three were taken into custody following the death of bin Laden during a U.S. raid on his Pakistani compound last week.

Well, the European Union slapped sanctions on 13 top Syrian officials for their role in the deadly crackdown on anti-government demonstrators. The man ultimately responsible for the country, President Bashir Assad, is not on that list. His youngest brother was named as principal overseer of the crackdown. All 13 are subject to an arms embargo and travel ban and their assets are being frozen in Europe.


CATHERINE ASHTON, EU FOREIGN POLICY CHIEF: We've actually focused on the key individuals who are responsible for some of the repression that we're seeing in Syria. We recognize that it's still important to keep channels of communication open. This is all 27 member states, remember, working together.

I've been talking to the foreign minister of Syria today, to say, please, change course. Please, now try and find a peaceful route to allow people to get their grievances across and to support the Initiative for Dialogue.


ANDERSON: In Japan, the prime minister, Naoto Kan, has apologized over his country's nuclear crisis and is taking responsibility by docking his own pay.


NAOTO KAN, JAPANESE PRIME MINISTER (through translator): To take responsibility as the leader of Japan, I would return my prime minister's salary from June until the nuclear power plant crisis is under control.


ANDERSON: Our apologies for the lack of sound on that.

Maybe it was good. I just couldn't hear it myself.

Well, that means the Japanese leader will be just over 20,000 a month out of pocket.

Well, the former California governor, Arnie Schwarzenegger, and his wife, Maria Shriver, have separated. The political power couple celebrated their 25th anniversary just two weeks ago and they have four children.

In a joint statement, the two say they are living apart and are working on the future of their relationship.

Well, don't wait for a distress signal, just assume they need help. The U.N. wants all ships in the Mediterranean to be on the lookout for civilians fleeing Libya after a deadly incident at sea.

That story just ahead.


ANDERSON: Twenty minutes past 9:00 out of London.

You're watching CONNECT THE WORLD.

I'm Becky Anderson.

Well, NATO is stepping up the pressure on Moammar Gadhafi's regime with a bombing blitz after warning that his days in power are numbered. Libyan state TV says this is some of the damage from new air strikes in Tripoli. NATO planes roared low over the capital for hours early on Tuesday, reportedly hitting a command and control facility, among other targets.

Well, NATO also hit sites around Misrata, where rebels are fighting to repel repeated government assaults. It's been extremely difficult, as you know, to get news out of Misrata. But a journalist there did describe the scene for us a short time ago.


MARIE COLVIN, JOURNALIST: I've just come from the western front, where there's absolutely ferocious fighting. The rebel front line was hit by mortars, long-range rockets and the fighting came so close to where I was that we had bullets whizzing around. They sound like very angry hornets.

The rebels did hold that line and -- and meter by meter, were able to advance.

It's a very different scene here than Eastern Benghazi, where I think everyone has seen those pictures -- the rebels race forward and then as soon as something comes in, they break.

But here, Misrata is under siege. They're defending their homes. They're defending their families. And they are not giving up an inch. They are fighting.

ANDERSON: And Marie Colvin reporting there.

Well, the crisis is leading more and more civilians to risk their lives to escape the chaos there. The United Nations tells us that the number of flimsy and overloaded boats leaving Libyan shores is on the rise. And a terrible incident just days ago is a stark reminder of the dangers that these refugees face.

Nima Elbagir joins us now from Tripoli with details of a capsized boat -- Nima.

NIMA ELBAGIR, CNN CORRESPONDENT: Well, Becky, this really has been hard, the impact of this conflict here in Libya. Thousands of refugees, thousands of asylum seekers are trying to make their way across the Mediterranean into Europe. And for all those thousands that successfully and fortunately make that trip, there are countless others who do not and who are lost at sea.

Just this weekend, as you said, 54 people are believed to be either dead or missing after that overloaded boat was intentionally capsized by its captain.

We managed to speak to some of the survivors here in Tripoli -- Becky.

Here's what they had to say to us.


ELBAGIR (voice-over): For the refugees struggling up at shore, this is the promised land. Many of them risk their lives again and again to it here.

Ibrahim is one of the survivors of the boat that capsized last weekend.

IBRAHIM (through translator): The boat was overloaded. The captain said no more than 400 people, but 350 more were pushed on board. There were over 750 people. The boat started rocking like this, from side to side. And because the captain was within sight of shore, he decided it was better to capsize it himself while there was still a chance of survival.

ELBAGIR: This is not the first boat Ibrahim has been on that has overturned. He was also on a boat that sank at the end of April. But he remains undeterred.

IBRAHIM (through translator): We will go back to sea. It is God that kills and God that saves. We have no choice. We will keep trying.

ELBAGIR: Hundreds of Somalis have left the refugee camps they fled at the start of the fighting in Libya, trekking back cross country to Tripoli, even crossing through the front line. Frustrated, they say, because the international community has failed to help them.

UNIDENTIFIED MALE: The life in the camp, there is no good life. There is not any food. There is no jobs. There is no everything. So that's why as the future -- there is no ready -- there is no future.

UNIDENTIFIED MALE: I'm trying to go in the sea. We want to go to sea, really. We are, even if we die, we are going to sea.

ELBAGIR: The Somali ambassador to Tripoli tells us hundreds more Somalis and other nationalities are continuing to make that desperate trek back inland.

UNIDENTIFIED MALE (through translator): There was an earlier incident on the 26th of April. Fortunately, the number of casualties was less -- two children and a man. It was in the same waters, off the Tripoli shore. There were other incidents even before this and these incidents will continue.

They will continue taking these risks until finally, by the grace of God, they reach a safe harbor.

ELBAGIR: For refugees tired of waiting for help from the outside world, the hope of salvation, however dangerous it seems, is worth the risk.


ELBAGIR: The Libyan government, for its part, has shared that because the NATO nations have robbed Libya of the ability to patrol its coast, they deserve to pay in terms of this onslaught on their borders -- Becky.

ANDERSON: All right.

Nima is there in Tripoli for you.

The United Nations Refuge Agency is asking all ships in the Mediterranean to be on the lookout for both fleeing Libya, saying they shouldn't wait for a distress signal to offer immediate assistance.

But once the people on board are rescued, where would they actually go?

Well, Dan Rivers takes a look at that dilemma for you.


DAN RIVERS, CNN CORRESPONDENT: (voice-over): On the violent streets of Misrata, it's easy to see why civilians are risking their lives to flee. Many now think staying here amid all this is simply not an option. So this is how many are choosing to escape -- a perilous boat journey across the Mediterranean. This boat crammed to the gunnels with passengers arriving on the Italian island of Lampedusa on Sunday.

Relieved refugees made it ashore, cold and exhausted, but alive. But hundreds of others are thought to have drowned at sea, making the same crossing in other boats.

This priest says he received a phone call from one boat crammed with 72 people fleeing Tripoli who were drying from thirst. He says he alerted the Italian Coast Guard and survivors told him a military helicopter did drop them aid, but no actual rescue was attempted.

The priest says all but 11 of the 72 people died when they eventually drifted ashore at Misrata.

The U.N. is criticizing the lack of help for boatloads of people who are clearly in distress.

LAURA BOLDRINI, UNHCR SPOKESWOMAN: The military now sees plenty of vessels -- commercial vessels, fishing boats and military vessels. So it's very difficult to accept the idea that there was, you know, a boat with -- with many migrants on board which was left adrift for two weeks.

So this shouldn't happen anymore.

RIVERS: Speaking as an event to celebrate the 60 anniversary of the U.N. Refugee Convention, organizers demands that more be done to rescue people fleeing Libya.

DONNA COVEY, REFUGEE COUNCIL: That's not happening at the moment. We need to see concerted European action so that doesn't happen and so we don't see any more people dying on their way to Lampedusa.

RIVERS: While Britain's deputy prime minister, Nick Clean energy, seemed all too happy to celebrate six decades of protecting refugees, in the Libyan crisis, he says there's to be no U.K. asylum for those arriving in Italy -- no sharing of the refugee burden around Europe.


You have to deal with it.

Do you deal with it by sort of, you know, this -- this odd phrase, as if somehow pretending it's a kind of -- a parcel, the sort of burden that you -- that you sort of divide up neatly like a cake. I don't think that is -- I don't think that's -- I don't think that's on the table.

RIVERS (on camera): The European Union says 29,000 refugees have arrived in Italy since February the 20th and hundreds more are turning up each day, giving politicians in capitals across Europe a real dilemma -- yes, they say they want to protect civilians, but many seem reluctant to have huge numbers of asylum seekers arriving on their shore.

Dan Rivers, CNN, London.


ANDERSON: Some reporting for you.

Well, that new still rocked FIFA's executive committee from television rights to knighthoods (ph) to cold hard cash. We'll tell you what some members are accused of requesting in exchange for their votes.

That and your headlines, coming up.


ANDERSON: At just after half past nine in London, you're back with CONNECT THE WORLD. I'm Becky Anderson.

Coming up, another battering for FIFA. Football's already tarnished governing body is hit with a new round of allegations. Details on that coming up.

Plus, they've done nothing wrong but are forced to live behind bars. South Africa's jail babies, a special report for you.

And she's known to many of us as the singing nun in "The Sound of Music." Why Julie Andrews decided to pick up her pen and start writing children's books. Your Connector of the Day, upcoming in the next half hour here on CNN.

Before all of that, let's get you a quick check of the main news headlines this hour.

It's a deal. In a surprise move, Microsoft has bought Skype for $8.5 billion. Now, the acquisition is the biggest in Microsoft's history, and the markets liked it. Tech stocks in particular pushed higher on Wall Street on Tuesday.

Well, the European Union has hit 13 top Syrian officials with sanctions in connection with the crackdown there on protesters. That includes the Syrian president's younger brother. The officials are subject to an arms embargo and a travel ban. Assets they hold in Europe will be frozen.

Pakistan's interior minister says that Islamabad will allow the US to question the widow of Osama bin Laden, or all three of them, in fact. They were taken into custody after US special forces killed bin Laden last week. Officials in Pakistan have not said, though, when or where those interviews will take place.

And the Mississippi River continues to flood its banks and is now cresting in Memphis, Tennessee. The river is hitting flood levels not seen in more than 70 years. The high waters are expected to stay at those near- record levels for days.

Britain's newest royal couple, Prince William and Catherine, Duchess of Cambridge, are on their honeymoon, and they say they want privacy. St. James's Palace won't say where they've gone.

Those are the headlines for you this hour.

Well, today FIFA being hit with a fresh round of accusations about corruption and misconduct in its executive ranks during the World Cup selection process last year.

Now, the charges were laid out during a British parliamentary hearing today in which two executives were accused of accepting more than $1 million each in exchange for their votes.

The former head of England's football association, David Triesman, also named four other committee members who he says requested bribes.

Well, among the accused are Jack Warner, he's the vice president of FIFA and the head of Caribbean football. He allegedly asked for cash to build an education center and money to buy World Cup TV rights for Haiti.

Nicolas Leoz, the head of South American football, is accused of asking for an honorary knighthood.

Brazil's football chief allegedly invited Triesman to "come and tell me what you have for me."

Jacques Anouma from Ivory Coast is accused of taking $1.5 million exchange for his vote for Qatar.

And Issa Hayatou, the head of African football, is accused of taking the same bribe.

Finally, Worawi Makudi from the -- from Thailand allegedly asked David Triesman for TV rights to a friendly match between England and Thailand.

So, what do those accused have to say about the allegations? That is the question I put to our own Pedro Pinto a short time ago. Have a listen to this.


PEDRO PINTO, CNN SPORTS CORRESPONDENT: Well, Jack Warner was the first to react, and he said, and I'm going to quote, Becky. His reaction was quite strong. He said, quote, "The allegations were a piece of nonsense."

Now, it's not the first time that Jack Warner has been implicated in allegations coming from the English Football Association or people connected with English football, and there's quite a turbulent relationship there.

As far as the other men implicated are concerned, they have not given official statements, and CNN has not been able to get a direct reaction from them.

However, Nicolas Leoz, one of the most powerful men in South American football, who's also involved, he recently revealed that he had been invited to the royal wedding by Prince William during the whole bidding process, saying that that could have been interpreted as a bribe, as well.

So, I think that was kind of an attack that he decided to fire out before being involved in anything that he could -- that he knew could come.

ANDERSON: And these, of course, still only allegations. Why did Triesman take so long to dish the dirt, do you think?

PINTO: There are two reasons for this. The first is that he felt at the time that it would not be taken seriously, what he had to say. He also felt that the England bid could have been -- could have been affected negatively in the whole process and would affect the chances that they would have had to win.

Lord Triesman also believes that, at the time, he had recently been implicated in a scandal himself. He had lost his position as the head of the bidding committee due to some comments he made about rivaling bids.

As far as what he had to say about that, he explained to members of Parliament why he didn't blow the whistle earlier.

DAVID TRIESMAN, FORMER CHAIRMAN, ENGLISH FOOTBALL ASSOCIATION: I'm not sure it was the right thing to do, and I'll acknowledge that. But what we did was we decided inevitably that we would not engage in any of those kinds of activities, whatever the suggestions were.

There was a huge amount of pressure to try and secure these games for England, a huge desire not to burn off any prospects of doing so. And although there have, from time to time, been some discussions with people at FIFA, the point was not pressed.

I think in retrospect, we would have burned off our chances of the games very much earlier, probably no greater disadvantage than we ended up with, when one things of the entire balance, had we said what we knew to be happening earlier.

PINTO: Lord Triesman, explaining the reasons why he did not decide to reveal these allegations earlier. And it's important to say, Becky, as well that he was responding today in an inquiry on why England failed so miserably to win the right to host the World Cup in 2018. They got only two of a possible 22 votes in the first voting round.

ANDERSON: Yes, very disappointing. What do you think this all means for FIFA, one of the most powerful organizations in the world?

PINTO: I have one word for you. It's "restructuring." It's something which has to happen now. There are elections on the 1st of June. Sepp Blatter has been campaigning, he's going up against Mohammed bin Hammam, and this is something they have to look at.

Sepp Blatter reacted today. He said, "If these allegations are true, we'll do everything in our power to try and get to the bottom of it." He said, "If it's true, I will fight this."

However, it's clear that if you include all the men involved today in Lord Triesman's speech, if you include the two members who were suspended before the vote, and the allegations that have been surrounding everyone, it means that seven out of FIFA's executive committee, 22 -- 24 members have been implicated in some kind of wrongdoing or alleged wrongdoing.

So, it means that definitely they have to clean up their image and they have to make the whole voting process more transparent.


ANDERSON: Pedro Pinto, my colleague here at "World Sport" for you on the FIFA saga that seems to continue to roll on.

Well, up next on the show, babies behind bars. The heartbreaking dilemma prisons face. Should babies stay with their mums in jail or be sent away to live with foster families. Robyn Curnow goes in side a female prison in South Africa to meet the country's innocent inmates.


ANDERSON: It's 40 minutes past 9:00 in London. I'm Becky Anderson. Now, on CONNECT THE WORLD, we are committed to bringing you stories that stand out as revealing, insightful and, I hope, really make all of us think. And this next report, I think, does all of that.

The question at its heart, should female inmates raise their babies behind bars, or would they be better off living with foster families? Well, in South Africa, women can serve time with their kids, but as Robyn Curnow discovered, growing up as an innocent inmate is far from ideal.



ROBYN CURNOW, CNN CORRESPONDENT (voice-over): Locked behind bars, guilty of no crime but to be born to mothers who broke the law and were jailed. These are South Africa's littlest inmates, doing time with their mothers inside the cold, dark corridors and cells of the Johannesburg female correctional facility are 27 toddlers.

SIZAKELE ZWANE, CORRECTIONAL SERVICES DEPARTMENT: It's not the nice thing, because the correctional facility is not a conducive environment for the growth of a human being. So, for the children that are growing inside the correctional facility, it's not a good thing at all.

CURNOW: The high walls, the razor wire, the isolation, intimidating even for an adult.

CURNOW (on camera): The authorities here in South Africa face a dilemma. On one hand, they know that the mothers need to bond with their babies, so they try and make these prisons child-friendly. But on the other hand, they know that raising a baby behind these walls is not ideal.

So what they're saying is that the mothers have two years, and then they have to send their baby away to either foster care or to family.


CURNOW (voice-over): Moipane Nkwana, an inmate here, was pregnant with her fifth child, a much longed for baby boy, when she was jailed for fraud.

NKWANA: It's a gift and a blessing in disguise because he's the only boy. We have two sets of twins, girls. So it was like God is playing my mind. I'm in prison with a boy baby and -- why now?

UNIDENTIFIED FEMALE: Any complaints? Are you fine?

CURNOW: Confined to their tiny cell at night, she says her son's life, like hers, is defined by the strict routines of prison life.

NKWANA: He's deprived in most of the things. It's a no-no for a child, this place. Very much depriving. It's cheese all the way, it's one uniform. The child doesn't understand the outside world.


CURNOW: The authorities feed, clothe, and educate the children, but they say these babies just shouldn't be here in the first place.

ZWANE: All these children have got fathers outside, but the fathers don't reach out, they don't avail themselves to assist in taking them outside the correctional facility.

CURNOW: Correctional Services say they're looking at changing the law. Some suggest a new mother's sentence should be deferred until her baby is old enough for her to leave it.

For Nkwana, her sentence is nearly over. But one day, she knows her son will ask why he was raised with strangers, women who have stolen, hurt, or killed others.

NKWANA: He's asking why? Why? And you just can't answer that, to say "why?" It's temptation. So if only maybe -- if us mothers, we also need not to be tempted by material things. Just live and accept what you have.

CURNOW: Robyn Curnow, CNN, Johannesburg, South Africa.


ANDERSON: Well, of course, the dilemma is one that prisons around the world often struggle with. And joining me now, I'm happy to say, in the studio is Alison Hannah, the executive director of Penal Reform International.

I want to look at this on a global scale and take it out of South Africa. How common is it for young kids to be brought up behind bars?

ALISON HANNAH, EXECUTIVE DIRECTOR, PENAL REFORM INTERNATIONAL: It's actually very common. Most countries will have mothers with babies behind bars, and often the children will stay with their mothers for anything from a few months up to maybe five years of age. So it's not an uncommon problem.

And in fact, it's quite interesting that the film was about South Africa, because now-retired Judge Albie Sachs, who's internationally very respected, made a decision in 2007 not to send a woman to prison that he otherwise would send to prison because of the impact it would have on the children. So, it's quite a recent phenomenon to recognize the problem.

ANDERSON: In your opinion, what is the best way of caring for babies born in prisons? Should they be allowed to stay with their mums, or should they be fostered out?

HANNAH: Well, I think this sort of shows that there is a real dilemma here. Most people would accept that very young babies need to be with their mothers. If they're separated from their mothers at an early age, it's likely to have a very damaging emotional impact on them for life. But of course, prison is a very bad environment for bringing up a baby.

ANDERSON: What sort of help, then, is available in prison?

HANNAH: Depends -- depends very much on where you're looking at. There is an endless range of services or no services, depending on which country. In some countries, no services at all. If a woman is pregnant, they get no special dietary provision. She may get no special -- natal care. And of course, as you know, there are some babies that are born to women who are shackled to the hospital bed.

ANDERSON: You will say, I know, that to a certain extent, women with kids, or women about to have kids, should have some sort of preferential treatment. Am I right in saying that? And if you are -- if that is your thesis, you must understand that there are those out there who will say that's simply not right.

HANNAH: Well, of course, there's the strong feelings about women in prison and about prison in general. But everybody would agree that the babies that we've seen in that film have not committed any crime, who are innocent of anything other than being born behind bars.

And there is no reason why they should be made to suffer because they have, by an accident of fate, been born to a woman who's kept in prison. So, I think everybody would agree that babies should not suffer for their mothers' offenses, if you like.

But how you deal with that is going to come down very much to a question of political will and resources. And the ideal is, obviously, for the babies to get a similar level of care as they would in the community. But there are some countries where there is very little care in the community and very little care inside the prisons.

ANDERSON: It's fascinating, and an important story. And we're glad that we could do it tonight, and we do appreciate your thoughts.

HANNAH: Thank you.

ANDERSON: Coming into the studio here at CNN.

Tonight on CNN, get the story behind the story. Michael Holmes talks to Robyn Curnow who, of course, made that film, about the story, the inmates she met, and the conditions that the kids live in. That is "BackStory," it's about 15 minutes from now, and that is right after CONNECT THE WORLD. Do stick around for that.

From Mary Poppins to Maria Von Trapp to our Connector of the Day. Coming up, Julie Andrews reveals what it was like to work on some of the most iconic films in history. Plus how her granddaughter inspired her new book. Stay with us.


ANDERSON: Well, here's a treat for you. Beloved Hollywood icon Julie Andrews has been gracing stages and movie screens for decades, of course. And this week, she graced CNN with some of her time. The distinguish actress and author spoke with me from the US where she lives, but she remains, as always, proudly British.


JULIE ANDREWS AS MARIA VON TRAPP, "THE SOUND OF MUSIC" (singing): The hills are alive --

ANDERSON (voice-over): She's a face and a voice that we all grew up with. Whether it's Maria or Mary Poppins, Julie Andrews is one of film's greatest icons.

The Academy Award-winning actress started out on the vaudeville stage, where she was discovered as a child to have an incredibly rare vocal range, able to sing four octaves, as she proved in "Mary Poppins," her silver screen debut.



ANDERSON: Sadly, in 1998, an operation on her vocal chords left her voice severely damaged. But that didn't stop Andrews from tackling new realms. She starred in a number of films, including "The Princess Diaries."



ANDERSON: And embarked on children's book writing. And her latest book is entitled "The Very Fairy Princess," which she wrote with her daughter.

EMMA WALTON HAMILTON, JULIE ANDREWS' DAUGHTER: The best surprise for us is that we get to have a creative, playful relationship or aspect to our relationship as opposed to just the usual sort of things that mothers and daughters of a certain age might otherwise be preoccupied with.

ANDERSON: Andrews explained to me how she got into writing.

ANDREWS: About 30-something years ago, Becky, I've been writing that long. I think I was the first celebrity author, and I get really ticked off when people say that about me. I lost a game that I was playing with my kids, and I had to pay a forfeit. And my eldest daughter, my stepdaughter, said, "Your forfeit should be that you write us a story."

So, I thought, OK, I'll dash off a couple of pages, and it'll be fun. And then, because it was a new stepdaughter and I thought maybe it would help us bond, I began to write, and I really enjoyed it, writing something that I thought she would appreciate it, and it turned out to be the first book I ever had published.

ANDERSON (on camera): Tell me about the book. Do you know where it's going?

ANDREWS: It's based -- loosely based -- on my daughter Emma's young child, called Hope, and she's such an amazingly individual little girl. And in spite of socks about her ankles and flower -- flower high tops and everything, she has the wings and the crown and all of that.

So, it's loosely based on Hopi, but it's really every little girl who believes she really is a princess somewhere deep inside.

ANDERSON: How different is writing from performing?

ANDREWS: Funnily enough, there's quite a similarity. It's perhaps a degree quieter. But the actual idea of putting on a production, which is what a book is, you have the quality of paper, you have the choice of your illustrator and you hope you'll be as blessed as we've been with this particular book.

You have the feeling of opening night and the day that it comes on the stands. And it's really -- what is the cover, what are the end pages, you know how that is. It gets to be a production, and it's not unlike what you have to do in the theater.

ANDERSON: Well, let me put this question to you, then. Ainsley asks "What's your favorite role and why?" And do humor us, we're talking about acting, of course, now.

ANDREWS: They've all been great learning experiences. To say that -- I wouldn't -- I loved doing "The Sound of Music" and "Mary Poppins," and they were very early films for me, and I was learning on my feet.

Films that I made with my husband were a joy. "Victor Victoria," a little film that we made together which was very biographical called "That's Life." A black and white movie that I did very early in my career called "The Americanization of Emily." I had a wonderful screenplay about the folly of war and how we honor our war heroes and procreate seemingly more images about war.

ANDERSON: In 1965, I found a newspaper piece. "The Pittsburgh Press" wrote that you were -- described you as "the epitome of British reserve and fortitude," which I thought was absolutely lovely. It was when you were picking up your Oscar for "Mary Poppins."


ANDERSON: Do you still feel very British?

ANDREWS: Well, I'm very flattered, but I'm not sure that "restraint" really works for me. Yes, I do. I'm very proud to be British. I feel like I carry my country wherever I go, and kind of in a very Pollyanna-ish way, I'm afraid.

I feel I try to represent it. It's a sort of hands across the water kind of thing. And it feels important to me, and therefore I do it.

ANDERSON: Listen, we were talking about picking the Oscar in 1965 for "Mary Poppins," humor me if you will and talk to me about "Sound of Music" and "Mary Poppins." Of course, people know you best for those. Give us some gems, if you will.

ANDREWS: "Mary Poppins" was mostly about patience. It taught me how to be patient because there were so many special effects in that movie. There was an enormous amount of sitting around waiting for the right moment to shoot, because technically it took so much trouble.

And so much of it was shot in front -- all the animated stuff was shot in front of a big, huge yellow screen with nothing there. So penguins, the tortoise, the butterflies, you just had to pretend that they disappeared and so on.

"Sound of Music," there were many, many memories. A funny memory was when we were all in the boat rowing on the lake and we come home and I stand up and I see the captain, and we all fall out of the boat by accident.

And just before we were rolling that take, the assistant director came over to me and said, "Julie, could I just tell you something. The little one doesn't swim. So could you fall forward, please, and grab her as quickly as you can?"

And I'm saying, "What?"

"No, we'll be there as quickly as we can, but we don't -- we don't want her to go under too many times."

So, my God, it was an awesome responsibility in this, this sweet little girl. Anyway, the boat rocked forward, backwards, forward, and I went over backwards. I've never done the breast stroke as fast in my life, and we did save little Kymmie and -- but it was a nasty moment.

ANDERSON: Lovely. Listen, Grace has written to us, Julie. She says, and it's a great question, and it's one we've asked people before, but I want to hear it from you. "What's your best advice to a young aspiring actress?"

ANDREWS: I think that if you're really passionate about what you want to do, if it's in the theater or whatever you're doing, actually. But if it's in the theater and you're really passionate about it, I would say, based on my own life, that amazing opportunities are going to go floating past your nose when you maybe least expect it.

So, my advice is always do your homework. Be ready. And then, work as hard as you can, learn as much as you can, and those opportunities will at some point, undoubtedly, pass.

ANDERSON: Julie Andrews --

ANDREWS: And come to pass, I should say. Yes.

ANDERSON: Julie Andrews, thank you.


ANDERSON: Julie Andrews for you. Your Connector of the Day, of course.

Well, before we go tonight, to the rescue! Tonight's Parting Shots, seems to be the season for it, at least. We have a four-meter whale, here, stranded in the shallows of a Nova Scotia river in Canada. Fishery officers had to dig a trench to help the mammal back to see.

Well, most of the digging have been done here. That was the problem, unfortunately. A member of Austria's national swimming team had dug a rather large hole in this Florida beach. Well, it was all in good fun, until the sand collapsed around him, burying him up to his neck. A team of 60 eventually dug him back out.

And that hole in the wall that you see here isn't good news. It's where a woman in Seattle crashed her car, plunging down an elevator shaft in a car park. Rescue crews came to her rescue. Fortunately, she wasn't hurt, though possibly a little injury to her pride, I would expect.

Fifty-eight minutes past the hour. I'm Becky Anderson, that is your world connected this evening. Thank you for watching. The world news headlines and "BackStory" will follow this short break, so don't go away. Stay on CNN.