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Quest Means Business
Spain Budget Crisis; Eurozone Boosts Firewall to $1 Trillion; European Markets Up; Why European Markets Gained; Dow Bounces Back; UK in Grip of Petrol Panic; Providence's Good Fortune; European Currencies Gain against Dollar; BMI Purchase Approved
Aired March 30, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, HOST: The budget that bites. Spain embarks on its toughest austerity drive yet.
Stoke up the firewall. Europe's finance ministers show their determination to end the crisis.
And from austerity to mega millions. Tonight, someone in the US could win the world's biggest ever lottery jackpot.
I'm Max Foster, this is QUEST MEANS BUSINESS.
As Spain cuts deep into its budget, the rest of Europe digs deep for bailout money. Spain is slashing public spending by $35 billion in a drive to curb its deficit. Europe has agreed to build a trillion-dollar firewall in case Spain or any other nation fails in its mission.
Fred Pleitgen is in Berlin. We'll start, though, in the Spanish capital with our Madrid Bureau Chief, Al Goodman. Al, just explain how we got in this mess in the first place.
AL GOODMAN, CNN MADRID BUREAU CHIEF: Hi, Max. Well, we have to go back a few years to the real estate boom. You couldn't build enough houses in Spain. They were building more houses in this country than in Germany and France combined. It looked like there was no end to cheap credit, et cetera.
Then came the crash. Not just in Spain, but in many other countries. But because the banks here are holding so much bad debt between the real estate, the new homes that are unsold, sitting there, you can see them all over Spain, unfinished buildings, and all this land that they have.
There's no credit flowing, and everything has dried up, and now the government is up to its eyeballs in debt. That's why we get this really, really severe budget. The treasury minister is saying the most austere budget in democratic Spain since the death Franco. Max?
FOSTER: Yes, and how are ordinary Spaniards going to see the effects of that? How austere is it on their lives?
GOODMAN: Well, we just saw an initial reaction in the general strike in Spain just a day ago. On the eve of this budget announcement, the unions blasting the austerity cuts and also blasting the labor market reforms.
Now, the more details about actually what's going to be cut, we may need to wait until Tuesday. That's when this goes over to Parliament. It's sure to pass. The government has a commanding majority.
But there will be slashing of infrastructure investment. That's usually a job creation plan, but they're going to slash that. Education cuts, housing cuts, right down the line, a 17 percent cut, basically, at all the ministries on average. It's going to be very serious. Max?
FOSTER: OK, Al, thank you very much, indeed, for that. Now, if Spain ends up needing help, it'll be able to draw on a firewall that's now a trillion dollars high. Now -- check this out. It's rather clever, isn't it?
European finance ministers have agreed to top up the half billion dollar euros in the permanent ESM fund, creating an overall bailout fund of 800 billion euros, or about a trillion dollars.
Not quite the mother of all firewalls that the OECD was calling for, and bear in mind that some of that money is already out there in countries like Greece, though the head of the IMF, Christine Lagarde says she welcomes the boost to that bailout fund.
Our Fred Pleitgen is with us from Berlin. The question is, for the member countries, is it enough?
FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Well, that's certainly what the euro group members said after their conference that they had in Copenhagen, a lot of them praising the compromise that they've reached, some saying that the figure in itself of $1 trillion should be enough to calm international markets.
But as you said, there were some who before this summit were saying that they believe even that wouldn't be enough. They believe that the figure needed to be closer to somewhere around one trillion euros, which is about $1.4 trillion.
So, certainly there was a lot of wheeling and dealing done. And in the end, it was really the Germans who got their way. The Germans were always very adverse to making the bailout package -- the combined bailout package, the firewall, if you wall, any bigger than the 500 billion euros that it was originally set out.
Now what they're doing is they're combining a temporary mechanism that was already in place with a permanent mechanism to then reach those 800 billion euros that you were talking about.
Now, German finance minister Wolfgang Schaeuble after this meeting said he also believed it was a great feat to achieve this 100 -- this $1 trillion. But he also said that the fundamentally important thing was not the size of the firewall, but that troubled eurozone countries undertake fundamental reforms. Let's listen in.
(BEGIN VIDEO CLIP)
WOLFGANG SCHAEUBLE, GERMAN FINANCE MINISTER (through translator): The deciding factor in the debate over firewall is misleading. Financial markets want to know if Europe is able to undertake structural reforms that could permanently ensure the stability of the currency and investments.
Here we are making great progress, the member states and in the structure of the European currency. That's crucial.
(END VIDEO CLIP)
PLEITGEN: And now, Max, when we're talking about these combined bailout funds, another thing that he euro group also decided today is they also said they want to fill this combined package with money faster than they'd originally said.
And also, one of the interesting things that the Danish finance minister said is, she said that she believed that the eurozone crisis seems to be moving into a phase of more stability at this point, but certainly the euro group does not believe that it's out of the rough waters just yet, Max.
FOSTER: And Fred, just explain why German has -- well, there's so much resistance to the firewall and increasing the funds.
PLEITGEN: Yes, there's a lot of resistance here in Germany, and one of the things that we have to keep in mind is that Germany is at odds not just with most of the eurozone countries, but also with much of the world, if you will.
The IMF was putting pressure on Germany, the US was putting pressure on Germany, the OECD was putting pressure on Germany saying that the bailout needed to be bigger than the Germans wanted.
One of the things that the Germans believe is that they think that if the firewall is too big, it might entice governments of countries that are having difficulties to not undertake the structural reforms that they need to undertake.
One of the things that the Germans have always tried to do in this entire process, with Greece, with Ireland, with other countries, as well, is leave that spectre of failure out there to make sure that these governments are really inclined to undertake these very fundamental and difficult reforms.
And one of the other things that we have to keep in mind about the Germans, as well, is that they have very, very good experience with austerity measures with reforms here at home.
In 2005, it was Germany that was being called the sick man of Europe. They then undertook a lot of the austerity measures that many other European countries are having to undertake right now, and now the Germans are very competitive.
So it is sort of the Germans trying to get their model to be the one that's used within Europe, not to say that it's being imposed, because that's certainly not something that the Germans would want to hear.
But it's certainly a country that has a lot of experience with austerity measures, a lot of good experience, and certainly believes that it is fundamental reform rather than more money being put out there that is going to lead Europe out of the crisis, Max.
FOSTER: OK, Fred, thank you very much, indeed, for joining us from Berlin. And also Al, thank you both for joining us with that story.
Well, investors seemed pretty pleased with the firewall. With the exception of Athens, perhaps all of the European major indices, at least, ended the week on a high note. You can see they're all up, most of them up more than 1 percent.
Today was the last trading day of the quarter. Let's take a look at the Q1 figures. And -- again, generally positive apart from Spain, which has its own problems. But have a look at the DAX, though, in Germany, up nearly 18 percent on the quarter.
Bob Parker is a senior adviser at Credit Suisse. He told me the markets are seeing developments from the EU and Spain as a positive step.
(BEGIN VIDEOTAPE)
BOB PARKER, SENIOR ADVISER, CREDIT SUISSE: Well, we have the Spanish budget announced today. The announcement is a budget deficit for this year of 5.3 percent of GDP. It looks as though that has been agreed with the European Union. It does mean a very serious contraction in the fiscal deficit in Spain. That will have a negative economic impact.
The market has reacted, actually, quite positively, and where there was pressure on Spanish capital markets, that has now eased off.
FOSTER: Why are they positive when it's not generally a positive story?
PARKER: The Spanish economy has very serious structural problems. Now, the banking system needs further organization, the real estate bubble, which burst spectacularly, is still in a downward fall.
Plus, that fiscal deficit, if we go back two years, that fiscal deficit was testing 10 percent. So, inevitably, Spain is going to go through not just one year, but probably a number of years of very difficult economic restructuring.
FOSTER: So, why are the markets positive today? It could've been worse, I guess.
PARKER: The answer is that there was very serious concern early this week and last week as to a potential disagreement between the Spanish government and the EU over the budget deficit.
FOSTER: And was that factored in then?
PARKER: Well, that was factored in because we saw pressure on Spanish capital markets and, for example, yields on ten-year bonds, which just two weeks ago were less than 5 percent, moved up at one stage to 5.5 percent. Now, they've come down again, so the market is saying this budget package is credible.
FOSTER: Let's look at wider Europe and the bailout fund, and more agreement there that positive agreement in terms of good news?
PARKER: Like many things in Europe, it is a step in the right direction. But it's a small step, and it looks as though the European bailout fund now has funds available of 800 billion euro.
FOSTER: Is that enough?
PARKER: Well, that's an interesting question, because it depends on who needs the bailout fund. If we actually add up Italian, Spanish, and French debt, for example, it's 4.2 trillion. So clearly, if there was a problem with those three countries, the money is inadequate.
FOSTER: But because they don't need it right now, we're OK?
PARKER: The answer to that is very much yes. And the biggest debtor is obviously Italy with $1.9 trillion of debt, and one has to say that the action taking by the Italian government under Mario Monti has been very credible in establishing market confidence in the Italian economy.
And you see that in the Italian capital markets. Yields have come down really quite sharply.
FOSTER: So, Europe has been a concern. It's on hold for the moment, we can say.
PARKER: I think that's certainly the answer.
FOSTER: What about the OECD's warning on oil prices being a threat to the global economy.
PARKER: Well, I think you have to ask the question, what level of oil prices would push the global economy back into recession. And on the modeling work we've done, the answer is if oil goes to roughly around $135 to $140 a barrel, but critically stays there for a period of time. Let's say three, four months. Then, that would actually push the global economy back into recession.
If oil prices just spike for a week, frankly, the impact would be very short-lived. And I don't think that that would be a problem.
Now, having said that, if you look at demand-supply in the oil market at the moment, you've got a very interesting trend. Supply moving up, demand moving down. And without geopolitical pressure in the Middle East, I would argue that North Sea Brent prices should not be $125 a barrel. They would probably closer to $110 a barrel. So, the economics argues for lower prices.
(END VIDEOTAPE)
FOSTER: Bob Parker, there. Let's have a look at the Dow, bouncing back, really, from some losses earlier on, up half of one percent heading towards its best start to the year, the Dow, on quarterly figures, at least, since 1998. So, actually a very broadly good picture.
Up next, it is the latest obsession sweeping the UK: petrol hoarding. And it's taken a dangerous new turn.
(COMMERCIAL BREAK)
FOSTER: The UK is in the grip of a run on fuel. Panicky motorists have drained some filling stations dry, and one woman was badly burned as she handled petrol in her kitchen.
Earlier in the week, a government minister suggested stockpiling fuel because of a possible strike by tanker drivers that hasn't happened. Paul Davies from CNN affiliate ITV News reports.
(BEGIN VIDEOTAPE)
PAUL DAVIES, ITV CORRESPONDENT (voice-over): "Keep calm, there is no crisis," they keep telling us. But here in Bristol and across the country, there are long queues and short tempers.
(MEN ARGUING)
DAVIES: Arguments over an alleged spot of queue jumping were breaking out on this forecourt in North London, and even the Unite union's assurance that its members would not strike over the Easter holiday failed to take the heat out of the situation. The prime minister says the union could do more.
DAVID CAMERON, PRIME MINISTER OF BRITAIN: The most constructive thing they could do is call of the strike entirely, and that would ease pressure in the system still further.
DAVIES: From the big cities to rural Scotland, many are saying that pressure is of the government's making.
UNIDENTIFIED FEMALE: One lady came in and said it was on the radio, if you see a petrol station that's still got fuel, fill up immediately.
DAVIES: They are now rationing petrol in Argyll and Bute, ignoring the pleas for calm in Sussex. A run on fuel that inevitably ends with the pumps running dry.
DAVIES (on camera): At this petrol station in Watford, they've had to employ stewards to control the rush of motorists chasing what little fuel is available. Most establishments in this area have run out. The government and motoring organizations might be saying don't rush to the pumps, but no one, it seems, is listening.
DAVIES (voice-over): Following one tragic accident, the government that issued and then retracted advice on filling jerry cans to protect against shortages has been asked by the fire brigade's union to make an urgent announcement on the dangers of storing petrol in the home.
Forty-six-year-old Diane Hill is critically ill after suffering 40 percent burns. It's understood she was pouring petrol from one container to another at her home in York.
LEE SMITH, NORTH YORKSHIRE FIRE AND RESCUE: It was tea time at the property. People were cooking the evening meal, and the lady involved was also decanting petrol from a petrol can to a glass jug. This resulted in the vapors being ignited by the flame from the cooker, and due to that flame then the glass jug was dropped and the lady was then engulfed in the flames.
DAVIES: In an attempt to get more fuel to the forecourts, the government has temporarily relaxed the regulations that control how many hours tanker drivers work. Ironically, many will now be earning overtime meeting the panicked demand.
A leaked memo from the UK petroleum industry's association to the government describes the current situation as "self-inflicted insanity." While few would disagree with that, it hasn't stopped them joining the queues.
Paul Davies, ITV News.
(END VIDEOTAPE)
FOSTER: Unbelievable scenes. Now, shares in Providence Resources have ended the quarter with gains of 125 percent. Providence has successfully tapped oil and gas waters from off the coast of Ireland, the first company ever to do so.
Not only that, the amount produced is almost twice as much as forecast. Ireland currently imports 100 percent of its oil. Providence CEO, Tony O'Reilly, Jr., told me his discovery is going to give the country a huge economic boost.
(BEGIN VIDEOTAPE)
TONY O'REILLY, CEO, PROVIDENCE RESOURCES: We had set a pre-drill target of 1800 barrels per day from this vertical well, and we came in at 3,514 barrels, so nearly double. And then additionally, we also flow tested and announced some gas results from an upper section that were fare in excess of any expectations that we had. So, obviously, we're very pleased.
FOSTER: What went through your mind when you go those results today? This is --
(CROSSTALK)
O'REILLY: Happy.
FOSTER: -- there's always a gamble, isn't it?
O'REILLY: It is a gamble. This was a kind of a rediscovery in the sense there's already been five wells on this field, but it was a confirmatory well being drilled in the 21st century, because the last wells were drilled in 1990. So, obviously, I was delighted for everybody involved. We worked very hard at this.
And obviously, it's important for Providence's shareholders, but equally, it's important for Ireland.
FOSTER: From what you've discovered so far, have you made any projections about how much oil there may be off the coast?
O'REILLY: Well, I think offshore Ireland there's been estimates put forward by the Irish government that there are upwards of 10 billion barrels of oil equivalent that you could find offshore Ireland, but of course --
(CROSSTALK)
FOSTER: Is your discovery changing those predictions?
O'REILLY: Well, I think what it's done is provided a little bit more comfort to the industry to look at Ireland and say yes, there are oil hydrocarbons. Obviously, there's always been gas offshore Ireland, but there's now potential for oil offshore.
FOSTER: Because Ireland is a net importer at the moment, right?
O'REILLY: Yes, we --
FOSTER: So, how much difference would this make to the economy?
O'REILLY: A huge benefit to the Irish economy. Obviously, if we -- when we commercialize a field like this, because obviously, you're going to get a balance of payments, you're going to get tax revenue, 25 percent, and obviously, you're not going to have to import as much. We import 100 percent of our oil right now.
So, there's a lot more room for improvement in terms of us delivering more oil, but this is a very good start.
FOSTER: Everyone's looking at this, of course, because Ireland's just tipped back into recession. But in order to really get the money flowing, you're talking years, aren't you, away?
O'REILLY: Yes. It is years. But again, the investment -- and one of the things I've been keen to point out to people is that the investment cycle can actually start now. And hopefully this encourages more international E&P companies to look at Ireland as a destination.
Yesterday, we announced that Repsol became operator of a project that we're involved in a prospect offshore Ireland, and we hope that more companies will look at Ireland. Because really, it's about drilling wells. It's a numbers game. There's only been 150 wells drilled over the last 40 years.
FOSTER: Some concern that the rigs are going to be visible from beautiful parts of Ireland. Can you reassure anyone that you're not going to ruin the view.
O'REILLY: Well, at the end of the day, what we're doing is in certain cases is doing appraisal wells, but in other cases, we're doing aspiration wells. And so the areas that people are concerned about offshore Dublin, at the end of the day, these rigs will come in, they'll do their testing and see if there is hydrocarbons there, and then they'll go away.
And there's plenty of ways to develop fields sub sea, et cetera. So, I don't think we need to necessarily get worried about the visual amenities at this stage.
FOSTER: And how's the whole industry thinking about this at the moment? Because it's always exciting, isn't it, when you -- there's a new discovery?
O'REILLY: Well, I think it -- I think the industry in the rest -- around the rest of the world are probably astounded that there is flowing oil offshore Ireland.
And I'll just say we're hoping that that, as I say, makes people think, let's look at Ireland again on the fresh and come in and maybe coventure with Providence or, indeed, other companies to try and explore for more.
(END VIDEOTAPE)
FOSTER: Coming up on QUEST MEANS BUSINESS, European authorities clear IAG to clear -- or to take over British airline BMI. We'll talk about what it means for competition when we come back.
European currencies are making gains against the dollar. The euro and the British pound both up around a fifth of one percent, one pound currently buys around $1.60.
(END VIDEOTAPE)
FOSTER: Now, the European Commission has given International Airlines Group the go-ahead to buy BMI. IAG offered $274 million for the low-cost carrier back in December, but the deal was delayed when IAG's rival, Virgin Atlantic, raised concerns about competition.
Now, Virgin had been hoping to take over the smaller airline itself. To sweeten its offer to the commission, IAG offered to relinquish 14 prize landing slots at Heathrow, a move that Virgin head Richard Branson said was "woefully inadequate."
IAG's also setting its sights on Japan Airlines, saying it will consider a stake if the carrier decides to re-list its shares in Tokyo later this year.
Paul Charles is a former communications director at Virgin Atlantic and he's now the CEO of communications company Perowne Charles. He joins me, now, in the studio.
You can hear Richard Branson saying those words, can't you? What's he so frustrated about?
PAUL CHARLES, CEO PEROWNE CHARLES COMMUNICATIONS: This is the end of an era, really, for Virgin Atlantic, because Richard Branson's been trying to take over BMI for pretty well 10 years now, since he first had the discussions with the airline.
But BA and IAG are much stronger as a result of this European Commission ruling. Essentially, it gives them more slots at Heathrow, it gives them over 50 percent of the slots at Heathrow --
FOSTER: And that's the point, isn't it? Whatever they've given up, they've now still got 51 percent of slots at Heathrow.
CHARLES: That's right. It makes them more dominant there, but BA and IAG argue that carriers in the rest of Europe, such as Air France, such as KLM, such as Lufthansa, have much stronger positions in their home markets. So, IAG claims it's playing catch up in the Heathrow market.
FOSTER: But the Heathrow market is the main market in Europe, so that --
CHARLES: It is. It is.
FOSTER: -- argument doesn't entirely work.
CHARLES: Absolutely right, and it's one of the most busy -- it's one of the busiest in the world, of course. Heathrow is constrained, it's congested, there's no sign yet of a third runway. So, any slots are very valuable, indeed, and that's why BMI was so attractive to both Virgin and to BA.
FOSTER: Why so valuable? Because of the business travel market?
CHARLES: Partly for that reason. But also because slots are few and far between at Heathrow Airport. They can command up to $25 million, $30 million a pair. So, if you can lay your hands on quite a bundle, as BA and IAG have done in this deal with BMI today, then you're laughing, because you don't have to buy them individually. You've got a whole tranche on your doorstep.
FOSTER: It's all aboveboard, so it's sort of good on them, I guess.
CHARLES: They've done very well. They've done very well.
FOSTER: In terms of what it means for the global airline industry, they're talking about more takeovers, aren't they, effectively? So, we're going to see this IAG abstract company -- holding company become bigger, more dominant.
CHARLES: Certainly takeovers and more alliances. IAG and Willie Walsh, its boss, have made no secret of the fact that they want to get bigger. They're eyeing up Japan Airlines, they're eying up other players in South America and Europe.
FOSTER: So, what are they creating?
CHARLES: They're creating one big consolidated group that can take on American carriers on their home turf one day, and potentially also become one of the biggest airline groups in the world. They're already pretty well in the top five. What they want to do is become one of the top two in the world.
FOSTER: And you mentioned alliances. That's a big part of this debate, isn't it? Because BMI's been taken out of the alliances.
CHARLES: BMI was in the Star Alliance, which of course was a major rival to IAG's One World and BA's One World. So, BMI are now out of the picture, the brand is likely to disappear after 70 years, so it's rather sad to see it go.
But I think one of the interesting next steps is what Virgin Atlantic will do in response. They've never disappeared, they've always been very strong, as you say, through Richard Branson. I think it's quite likely Virgin will start their own short-haul network with some of the slots that BA is being forced to give up as a result of today's deal.
FOSTER: OK, Paul Charles, thank you very much, indeed.
Up next, new CEO, same old problems. An earnings stunt continues to plague Research In Motion. We'll have an update for you after the break.
(COMMERCIAL BREAK)
FOSTER: Welcome back. I'm Max Foster, and these are the main news headlines this hour.
Spain's government has revealed plans to cut $35 billion in public spending. Civil servants will have their pay frozen and be expected to work longer hours as Spain tries to meets its E.U. deficit targets. The country's treasury minister called it the most austere budget in our democracy.
French police has arrested 19 people in a series of overnight raids targeting what French president Nicolas Sarkozy says are connections to radical Islam. The arrests come a week after a scandal from the department in Toulouse. That operation ended in the killing of terror suspect Mohammed Merah, the man believed to have killed seven people in recent attacks in that city.
U.S. President Barack Obama is going ahead with oil sanctions against Iran. The president says global supply is sufficient to introduce the rules without causing an oil price shock. The sanctions announced late last year will be imposed on countries and companies that still import crude from Iran.
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UNIDENTIFIED MALE: (INAUDIBLE).
(END VIDEO CLIP)
FOSTER: Blasts from pounding shells drown out a call to prayer in the Syrian city of Homs. Activists say Syrian forces are shelling several locations to the north in Idlib. Thousands of protesters are condemning the Arab world for not intervening. At least 42 Syrians are reported to have died in Friday's violence.
Protesters are gathered outside the presidential palace in Hungary and say they're not leaving until the president resigns. Pal Schmitt has been stripped of his doctorate following a month's long plagiarism row, which opposition parties say made him unworthy of the job.
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FOSTER: The week is ending on a bitter note for BlackBerry maker Research In Motion. The company's CEO has conceded that it needs to refocus its strategy after reporting a fourth quarter loss of $125 million. Overall revenues fell by over 20 percent to $4.2 billion. Despite that, shares in RIM are trading up almost 7 percent as investors focus on the company's new business strategy.
Maggie Lake has been following the story from New York, and she joins us now.
I mean, this, an amazing corporate story. But just explain to us again where did RIM go wrong?
MAGGIE LAKE, ANCHOR, CNN INTERNATIONAL: It is extraordinary, Max, when you consider that this is the company that was one of the innovators of smartphones, of push email. They sort of really defined what it is in the beginning. It had such a hold on it, to see what's happened and how much they're bleeding market share.
Listen, it's tough competition, partly Apple and Google, once they got in on the market, they are very, very stiff competitors. But really, I think this is a cautionary tale of the founder's syndrome. Michael Lazaridis and Jim Balsillie, brilliant product, brilliant engineers, but they really failed to accept and see the changes that were happening in that marketplace, especially the fact that it was shifting away from just corporate and security and really the sort of influence of the consumer and apps and the importance of design.
They just were in denial, much to the frustration, Max, of their investors for a long time now. And it seemed for a little while that the new CEO, Thurston Hinds (ph), was going to fall right into that camp as well, but today really marked a change.
And a management shuffle, shakeup, is one of the sort of three-pronged approach they have to this new strategy. And it is significant. They've got the chief operating officer, the chief technology officer out, and this is very important, former CEO and co-chair, Jim Basillie, that I just mentioned, the sort of heart and soul of RIM for a long time, off the board.
Now that may free them up to make some of these other changes. They announce a shift not completely out of the consumer market; a little confusion about this, but a shift back to focusing on corporate customers, that sort of core audience.
And very much the excitement of investors, introduce the idea that they would be open to maybe licensing or selling part of the business. This is a big departure. I spoke to Juan Allens (ph), who said this is the first time in a long time that I sat through a RIM conference call and didn't roll my eyes. That's why you see that stock price up today, Max.
FOSTER: Yes, and tell us about potential buyers. I mean, who wants that part of the business?
LAKE: Well, exactly, who wants to buy a turkey, right? I mean, you buy a company when it's up and coming and you're going to grow with it, not somebody who looks like they're struggling for survival, not if you want to get a deep in price (ph) for investors.
Anyway, I talked to an analyst who said it is a good question. It's not clear in terms of an outright buy. It's not clear the company would sell itself in its hole (ph) for part of the company, not really clear. And there may be somebody out there who might be interested in part.
One analyst I spoke to, Matt Thornton (ph), at Aviance (ph) Research, had a very interesting idea that licensing would be the way to go, that maybe RIM turned itself into an operating system of software services company. Get out of the hardware business and does the licensing agreement with, say, someone like Samsung.
Definitely a handheld device maker, maybe somebody like Samsung, who hasn't sort of gotten an exclusive deal with somebody else. That would give both of them an edge. It would definitely be a different kind of RIM, a smaller RIM, but maybe one with bigger growth margins and a chance for survival. So there are some options out there, Max.
The big question is it too little, too late? I blogged about this; it should be on our biz360 (ph) blog in a little while. A lot of people feel very sort of torn. There are some diehard BlackBerry lovers out there. But this is a company that's waited a long time to try to implement this strategy. It's not clear whether they're going to be able to pull it off, Max.
FOSTER: OK, Maggie, thank you very much. Look forward to the blog.
Now for a clear view of RIM's declining fortunes, just look at the company's market share over the last few years. From 2005 to 2009, BlackBerry grew from one-fourth to more than 40 percent of the smartphone market, according to the analysis firm Comscor (ph), just two years later that number had fallen by more than half to just 16 percent at the end of 2011.
Next, have you got your Mega Millions ticket yet? If not, you've got eight hours and 640 million reasons to get one. These are live pictures for you as the United States gets ready for the biggest lottery ever.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
FOSTER: The biggest lottery prize in history just got bigger. The organizers of the Mega Millions in the United States say the jackpot -- I can't believe this -- currently stands at $640 million. For context, that's more than Samoa's annual GDP. The drawing's in around eight hours' time. Susan Candiotti is in New York.
I mean, I can't get my head around these figures, but I guess everyone's feeling the same over that.
SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: I think you're right. In fact, it went up about $100 million just overnight. In the last few hours, really. They've been going nonstop here, Max, buying Lotto tickets, people dunking out -- ducking out of the camera's way.
But I just got this readout as to how many they've sold since we've been here, let's see, how many hours, maybe six hours, 4,235 tickets. That's how many they have sold for this particular lottery at just this one location. One of the people who bought a ticket is Judy from North Carolina. She's a retired police officer from there visiting New York, knows about the Mega Million lottery.
How come you're taking a chance?
JUDY LEDFORD, LOTTERY PLAYER: I've retired. I need the money.
CANDIOTTI: And --
(CROSSTALK)
LEDFORD: -- my children. There you go.
CANDIOTTI: And for you, too.
LEDFORD: Yes.
CANDIOTTI: What do you think you'd do with the money?
LEDFORD: Oh, I would give a lot to charity, and I would travel.
CANDIOTTI: Where would you like to go?
LEDFORD: Everywhere. I would like to go all over the United States, Hawaii for a long time.
CANDIOTTI: Oh, (INAUDIBLE) so many places to go. Now they say the chances are 175 million to one, 175 million to one that you would win. And yet --
LEDFORD: I will win.
CANDIOTTI: She feels lucky. She's not the only one, you know. We've heard all kinds of stories, Max, including someone who said she woke up this morning and just found a pair of jeans that she washed, discovered that $6 had survived being washed in the washing machine. She took that as a sign, came in right in here and bought $6 worth of Lotto tickets. It only takes one to win, Max.
FOSTER: Susan, it's just an amazing story. It's going to be an exciting time for someone. Susan, thank you very much indeed.
Jenny Harrison surely bought one of these tickets. But the question is, where you going to spend it on? I mean, it's too -- it's too much, isn't it? No, never too much.
JENNY HARRISON, CNN METEOROLOGIST: Well, I know what you mean. I think we've all been saying it, haven't we, that, yes, it is a bit much, isn't it, but --
(LAUGHTER)
HARRISON: -- you know, I wouldn't say no. I mean, let's be honest.
I mean, that's been the kind of thing you've got going here and of course (INAUDIBLE) ticket. So we will see, Max. We will see.
Now any talk about the weather conditions, really, across in Europe, so of course heading toward the weekend for most. And you can still see quite a big area of green. This is where high pressure is. It's being pushed out towards the west, actually, in the last sort of 24 hours. So a lot of central and eastern Europe seeing rain, and also quite a bit of snow in the forecast.
Also this is a disturbance pushing in towards Spain and Portugal. That is only a good thing, because look at the situation here, of course, with regard to the drought, all of -- for Spain and Portugal under some form of drought. And then the further north you get, we do see some areas under extreme drought.
And there are now dozens, in fact, hundreds of fires that are burning because, of course, the ground is so very, very dry. There has just not been any measurable rain for so very long. So this is an area of low pressure. It'll work its way on shore.
Now, unfortunately, because of the high pressure to the north and sort of east of there, it's not going to make a great deal of headway. And also, because it is so warm and dry here, it's just going to lose a lot of its energy. So it'll bring some showers, but nothing more than that, and not really much up towards those central or northern regions as well.
And as we go through the weekend, that high will shift further out towards the west, and so temperatures actually feel very pleasant. But closer to the average across much of western Europe. And then across the east, this is where it's still going to be feeling quite a big cooler. And as I say, we've got another system coming in there, and in that cooler air, some of that rain turning over to snow.
Now whilst all this is going on, we're still, of course, monitoring the conditions out there in the North Sea. This is the echo fiscal (ph) platform, about 80 kilometers away from the Elgin (ph) platform. Conditions fairly similar in the area. Winds still pretty strong. They haven't really varied very much over the last couple of days.
And this is the forecast for the next two days. As you can see that the winds, again, not really varying a great deal. We will see some stronger gusts in there. And so going from the northwest to a northerly wind on Saturday, then back to the northwest. And you can see all of that happening here on this wind forecast.
So remember, the darker and the bigger the arrows, the stronger the winds. But you can see, again, the direction o f those winds changing as we go through the next couple of days. Now this (INAUDIBLE) Friday but also Saturday and Sunday is when we're likely to see some rain in the area. And then by Monday, it should actually improve.
We should see some drier, better conditions. So with ITHA (ph) planning to be out there, then (INAUDIBLE) good thing. Here are the temperatures, and as I say, not bad, but getting closer to averages with still some nice sunshine on Sunday there for you, Max, in London.
FOSTER: Good news. Thank you very much. Someone talked about snow, but I'm glad you've got rid of that (INAUDIBLE).
(CROSSTALK)
HARRISON: It would be -- well, that's a chance and about the same as winning the lottery, Max, to get some snow (INAUDIBLE) 12 and (INAUDIBLE).
(LAUGHTER)
FOSTER: Jenny, thank you very much. Have a great weekend.
That is QUEST MEANS BUSINESS for you. I'm Max Foster in London. MARKETPLACE AFRICA is next.
ROBYN CURNOW, HOST, MARKETPLACE AFRICA: From Lagos to Nairobi, Ruanda to Johannesburg, Africans battle bumper-to-bumper traffic, crowded minibus taxis, dirty trains, hours spent traveling, toll fees, rising fares and skyrocketing fuel prices, all just to get to work.
This week on MARKETPLACE AFRICA we commute in Africa's economic (INAUDIBLE).
Six o'clock in the morning we're in Prater in Soweto, just outside of Johannesburg. Now South Africa's public transport system has been called going on the road to nowhere. It's disconnected and fragmented.
This week we're going to find out what it takes to get to work here in South Africa.
Mxolisi Colossa rents a room that he shares with his girlfriend. At this time, during the week, he quietly slips out.
So we're going down this way?
MXOLISI COLOSSA, JOHANNESBURG COMMUTER: Yes, (INAUDIBLE) --
CURNOW: So you start your journey, you walk down here?
COLOSSA: Yes, (INAUDIBLE) --
CURNOW: To catch a taxi (INAUDIBLE) first taxi.
We're joining him today on his daily commute, which involves trains, taxis and walking.
Lot of waiting.
COLOSSA: Yes, waiting, waiting, waiting.
CURNOW: He says it's not just the waiting for a minibus taxi, but the high costs, the waste of time and the dangerous driving.
Jumped a stop street (ph).
COLOSSA: Yes.
(LAUGHTER)
CURNOW: These guys drive like crazy men.
COLOSSA: (INAUDIBLE).
CURNOW: Mxolisi whispers, fearful the driver will hear us complaining. He says you can be kicked out of the vehicle for asking the driver to slow down or to drive safer.
Fairly regulated and expensive, these minibus taxis are one of the few ways passengers can get around. But they pay up to quiet and then jump off at the end, relieved to be safe, says Mxolisi .
So we've got a train to catch now.
COLOSSA: Yes. Is noisy our train is (INAUDIBLE). We are going to (INAUDIBLE).
CURNOW: OK.
COLOSSA: Yes.
CURNOW: This is a cheap train here?
COLOSSA: Yes.
CURNOW: OK. How much is the ticket?
COLOSSA: It's 650, (INAUDIBLE), yes.
CURNOW: (INAUDIBLE) dollar.
COLOSSA: Yes.
CURNOW: The train is cheaper than a taxi, he says, and you miss the morning traffic jams on the highway.
COLOSSA: (INAUDIBLE) turn his back (ph).
(MUSIC PLAYING)
CURNOW: On a good night (ph) you earn around 3,000 ran (ph).
COLOSSA: Yes (INAUDIBLE).
CURNOW: Which is about $400 (INAUDIBLE).
COLOSSA: (INAUDIBLE) yes.
CURNOW: A third of that goes to transport (ph).
COLOSSA: Yes.
CURNOW: Then what else have you got?
COLOSSA: I pay the rent and my account.
CURNOW: Your account?
COLOSSA: Yes. I buy food.
CURNOW: Food.
COLOSSA: And then --
CURNOW: You said you send -- you try and send some to your parents?
COLOSSA: Yes. If I do have. If I don't have --
CURNOW: Out of $400?
COLOSSA: Yes.
CURNOW: He's already spending a third of his salary on transport. The fares on this train are about to go up 25 percent, say these frustrated passengers.
UNIDENTIFIED MALE: So I think they have to change something as an -- as an organization, as a generating organization. And the system has to benefit the people, because we are the customers at the end of the day.
CURNOW: Soweto was created in the old days to keep black people out of the cities. That distance, trying to get into the cities, is still a problem.
UNIDENTIFIED MALE: Yes, it's still a problem. But there's nothing we can do, at the end of the day, because some systems that were developed in apartheid times, they're still in procession right now. So there's some things that we cannot change, you know, regardless how many times we may try. We cannot change them. So the distance from Soweto to (INAUDIBLE). We cannot change that distance.
CURNOW: So millions still make the same arduous journey into town day after day to earn a living.
South Africa's poor and working class still struggle to get from A to B, despite a number of high-profile infrastructure projects and some of the best roads on the continent.
This high-speed train (INAUDIBLE) train and a bus services built for the World Cup football (INAUDIBLE) new services that just don't connect with each other and the older public transport systems. Well, that's why the city of Johannesburg says it's working to better integrate its transport system.
REHANA MOOSAJEE, MAYORAL COMMITTEE FOR TRANSPORT: It's not acceptable for people to have to take multiple legs of a journey to get to work. But I think we also understand that our city (INAUDIBLE) deliberately to keep people apart.
We're now trying to transform the city's (INAUDIBLE) to bring communities together and the impact of the number of transfers that people have to do means that people are spending less quality time with their family, but they're spending more and more time in transit, affecting productivity, affecting the economy and for overall the (INAUDIBLE) transit situation doesn't speak well to the economic needs of (INAUDIBLE).
CURNOW: Many have to make a choice between a fare or food.
MOOSAJEE: I think the issue of the household spend on transit, our own studies are indicating that after food transport is the next item that households are spending disposable income on, and often even, you know, making do on basic nutrition to enable transit.
CURNOW: Fourteen stops after leaving Soweto, we pull into Johannesburg.
We're passing underneath the Nelson Mandela Bridge. We coming into Johannesburg. Johannesburg's called the City of Gold, eGoli. People have been coming here to make their fortunes for more than 100 years.
But it isn't over yet. We still have to get across town.
(MUSIC PLAYING)
CURNOW: Next on our journey, we speak to the finance minister about why South Africa's broken transport system is a lag on economic growth (ph).
(COMMERCIAL BREAK)
(MUSIC PLAYING)
CURNOW: We've been following Mxolisi Colossa on his commute. Trains, buses up there, the taxi rank over there, the pedestrians walking across that bridge. Getting to work involves for most people all of those modes of transport.
The trains disgorge millions of commuters every day, some singing and praying, at Park Station (ph) in the city center, a central train station without connections to other parts of sprawling Johannesburg.
So like most people, he now has to walk across town toward one of the many ad hoc taxi ranks (INAUDIBLE).
We've walked, caught a taxi, caught a train, walked, and now we're going to get -- catch another taxi.
COLOSSA: (INAUDIBLE), yes.
CURNOW: All right. I think this one looks like it might have just (INAUDIBLE) for us.
The final leg of his daily commute is nearly over. He'll repeat this journey all over again to get home, a five-hour daily reality that the finance minister says is an indictment on his government.
PRAVIN GORDHAN, MINISTER OF FINANCE: It's an indictment of our history, because I think what your viewers would appreciate is an understanding of what apartheid meant in South Africa.
What apartheid meant in South Africa is that the white part of our population occupied certain urban centers that black people were at a distance of between 20 and 50 km away from those centers. And that was part of the racial and spatial divisions that were cast in stone during the apartheid period.
Eighteen years into democracy, some of that has been compensated for, but a lot of that work still has to be done.
But one of our challenges, certainly, is to provide cheaper and efficient and, if you like, time-effective public transport to both the workers and citizens of this country so that they don't have to spend that amount of time, and that they can be more productive, both in their private lives and in their working lives.
CURNOW: Are we here on time?
COLOSSA: Yes, we are. We're on time.
CURNOW: At 8:30 we arrive at Melrose Arch (ph), a plush shopping area where Mxolisi works, a full 21/2 hours after we left his home.
So door to door, that took us 21/2 hours.
COLOSSA: Two and a half hours, yes.
CURNOW: I need an espresso.
(INAUDIBLE) shop assistance at a home furniture store. He makes it on time for a staff meeting. No one here, he says, really knows what it takes for him to show up to work day after day. One man's story echoed across the continent.
Well, that's Mxolisi's journey. Do tell us about your commute. We're online at CNN.com/marketplaceafrica. There's also a link to our Facebook page. But for me, Robyn Curnow here in Johannesburg, see you again next week.
(MUSIC PLAYING)
END
