Return to Transcripts main page
Quest Means Business
US Cable Companies Announce Big Merger; Time Warner Cable Shares Hit Six-Year High; Dow Closes Down 180 Points; Tough Day for European Stocks; Petrol Stations Starting to Reopen in Nigeria; Nigerian Strikes Still Costing; China Stocks Surge This Year; North Korean Elite Thrive While Others Suffer
Aired May 26, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:59:55] (NEW YORK STOCK EXCHANGE CLOSING BELL)
MAGGIE LAKE, HOST: All smiles on the floor. Still, it's the worst day for the Dow for the month. You're watching the closing bell on Wall
Street. It's Tuesday, the 26th of May.
Chartering a new course with Time Warner. A new US giant is born.
The Dow is knocked off its perch by a stronger dollar.
And Ryanair's chief executive tells me his charm offensive is paying off.
I'm Maggie Lake, this is QUEST MEANS BUSINESS.
A very good evening to you. Tonight, a merger deal so big it impacts one in six American households. Two of the country's biggest cable
companies, Time Warner Cable and Charter, are joining forces. After a string of failed tie-ups and regulation backlash, these two cable giants
now plan to team up and shape how Americans watch TV and use the Internet.
Now, unlike many countries, the US cable market is very regional. The company you use to get TV and Internet depends a lot on where you live.
Now, Charter's main markets are focused on New England and the South. Its key markets are states like Georgia, Tennessee, and Alabama.
By contrast, Time Warner Cable's key markets are the major urban areas: New York on the east coast, Los Angeles on the west coast, two of
its biggest markets and are extremely valuable to any buyers.
Even though Charter is leading this merger, it actually has less than half the subscribers that Time Warner Cable does. Together, they can start
to rival the market leader Comcast.
The problem for all these companies is that a new rival is also getting stronger. Netflix now has more members than the other companies
put together, 41 million in total. More and more people are now ditching their cable service to watch everything online instead.
Matthew Garrahan is the global media editor for the "Financial Times" and he joins me now. Matthew, thank you so much for being with us.
MATTHEW GARRAHAN, GLOBAL MEDIA EDITOR, "FINANCIAL TIMES": Good to be here.
LAKE: First of all, this is -- we know that this is an area that's been seeing a lot of merger attempts. The CEOs sound really optimistic.
What's the government going to say? Time Warner Cable merger with Comcast was already blocked. Does this one have a better chance of getting
through?
GARRAHAN: It does, mainly because in this deal, the combined Charter Time Warner Cable won't own as many broadband households as Comcast would
have done when it wanted to buy Time Warner Cable, which was blocked a few weeks ago. So this one has a better chance, but there's still a -- a 50-50
shot, I'd say, that it gets blocked.
And in fact, there's a $2 billion breakup fee attached to it. So if it doesn't work, Charter has to pay a pretty hefty price.
LAKE: That's right. And of course, the government looking at whether this is going to be good for consumers. Bigger is better, we sort of
understand why the companies want economies in scale. Not really clear what this is all going to mean for the consumer, because things are
changing really rapidly. What is this telling us about the media landscape here?
GARRAHAN: Well, several things. I think that the days of monolithic giant cable companies coming together are becoming increasingly rare. And
coming together because of video, providing TV services is becoming rare.
The real issue here and the future is in broadband. And you mentioned Netflix a minute ago. Increasingly, people are cutting the cord with their
TV subscription and watching alternative services, like Netflix, Hulu, Amazon Prime. But the way to get those services is primarily through a
cable company, because they're the biggest providers of broadband Internet.
LAKE: So we know that content is king. It also turns out that the highways and the pipes that get you that content --
GARRAHAN: Right.
LAKE: -- are increasingly valuable.
GARRAHAN: Right, so the companies are hedged because you might not want to pay for a Time Warner Cable TV package anymore, but if you want to
watch Netflix or Amazon or whatever, any other service, you still need high-speed Internet, and those cable companies are the ones that are going
to provide that service.
LAKE: We've been watching this and talking about this merger throughout the day. One thing that we haven't talked about yet on our air
is this is the return of John Malone --
GARRAHAN: Right.
LAKE: -- to a really powerful position once again. For our viewers who aren't really familiar with him, how significant is that?
GARRAHAN: Well, they call him the Cable Cowboy, all right? He played this big role over the last few decades in rolling up the cable sector. He
was a big player. He recognized that there were these regional monopolies, and if you rolled them all up, you could get a really powerful player.
And he's very canny. He does it without ever really buying outright control. So, he has pieces of these companies and influence. So he's able
to influence the outcome of deals like this without owning 100 percent. And he's able -- been a masterful performance, really, from the start.
LAKE: He has. And he's very prescient, isn't he? He seems to sort of understand the trends and get his foot in before, maybe, everyone
realizes what's going on. Who should be worried about his sort of dominance now if this goes through?
(CROSSTALK)
GARRAHAN: Well, if you took --
LAKE: Who's got the most to lose with this?
[16:04:58] GARRAHAN: Right. If you took the open Internet advocates, and there are plenty of them, and the people who opposed the
Comcast-Time Warner Cable deal, they still believe that this isn't a great deal for consumers, that it concentrates power in the hands of a couple of
companies. You're going to have three main video providers: Comcast, AT&T, Direct TV, which is also merging, and now Charter Time Warner Cable.
And then really, in broadband, there's only really Comcast and now Charter Time Warner Cable. So not a huge amount of competition. But then
there are these other services circling.
Like Google wants to provide broadband. They're making a play in that space. Verizon is doing so, but pretty slowly. So, Malone -- there's
plenty of hostility out there, but I think generally this deal probably will go through.
LAKE: Yes, because of those other players.
GARRAHAN: Right.
LAKE: And they, of course, say they need scale in order to make the investments that are necessary. We'll see how that fits with regulators.
They may -- they didn't buy it last time around.
GARRAHAN: No.
LAKE: Let's see if they do this time around.
GARRAHAN: Thank you.
LAKE: Thank you so much for coming in today, appreciate it.
GARRAHAN: Thank you very much. Thank you.
LAKE: Well, shares in Time Warner Cable popped more than 7 percent. Investors certainly liked the sound of this. They hit a six-year high.
Charter shares were up around 2.5 percent. We should also point out that Time Warner Cable has no relation to CNN's parent company, Time Warner.
The two companies went their separate ways back in 2009.
Well, for most US stocks, though, it was only one way, the action today, and that was, of course, down as we showed you at the beginning of
the show. The Dow Jones gave back over 180 points -- that's more than one percent -- during Tuesday's trading.
Paul La Monica is here to tell us what happened. And Paul, we look at that screen, it actually looked worse at one point today. What was going
on?
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: I think a lot of it had to do with concerns at some of the most recent economic data that came
out today. Could suggest that the Fed may want to raise rates in September after all.
We're going to be playing this game, I think, until the Fed finally raises rates. But you had some decent numbers about the housing market.
You also had a consumer confidence that was picking up a little bit, and a durable goods order, that number, that was also a little bit better than
expected once you look past the headline number.
Add all that up and maybe the Fed is going to raise rates, and that led to the dollar strengthening, oil plunging, kind of a repeat scenario of
earlier this year, and that's why you had stocks tumbling the way they did today.
LAKE: And yet, Paul, we've known for a long time that we're coming to the end of this ultra, ultra, ultra easy monetary policy. The Fed's been
trying to kind of communicate that even though they move, it's going to be cautious and they're going to watch and really be data dependent.
Shouldn't this already be all baked in already?
LA MONICA: You would think. I think that the biggest problem, though, is that there's a significant number of investors out there that
are professional, veteran investors that still have not lived in times when the Fed is raising rates.
The last time the Fed raised rates was 2006. They've kept rates near zero since 2008. So, you could have a trader that's got seven, eight years
experience that has never been around during what it's like when the Fed is boosting rates. So, I think there's still fear and uncertainty about when
the Fed will raise rates, how aggressive they will be.
But you're right, Maggie. I think Janet Yellen, to her credit, has gone out of her way to tell people that the Fed's not going to raise rates
at every meeting like they did under prior administrations, and they are definitely not going to try and pull the plug from -- pull the rug from
under the economy too quickly by jacking up rates too much too soon.
So, it is a bit mystifying that the market's still this concerned about when rates are going to go from near zero to -- 0.25 to 0.5 percent.
LAKE: And Paul, we may have investors that haven't lived through a sort of rising rate environment, but one thing they do know is that
sometimes there are unintended consequences in this global economy.
And also that you can't time the top of a market. We have to remember that these are markets that are sitting at record highs. Some people are a
little bit nervous if they're sitting on really good-looking gains and they want to kind of be a little bit protective at this point, don't they?
LA MONICA: Oh, that's a fantastic point. You have valuations that are stretched, I think, by many people. We consider the valuations are very
high right now. There are legitimate worries that maybe profit margins are near the top of this cycle. So, if that's the case, you really don't want
to be going that aggressive in the stocks right now. You probably want to be paring back.
And with regards to unintended consequences, the dollar is definitely strengthening, and that is, while great news for US travelers, it's bad
news for your Cokes, Procter & Gambles, J&Js of the world. All those companies, big multinationals that make a lot of money overseas.
It hurts them when they bring those dollars back to the US, translate them into the stronger currency. And also, it's harder to compete against
European and Japanese rivals in their home market when the euro and yen are significantly weaker.
LAKE: That's right. I think we're going to see a lot of action in cash, you have people worried about that, they're worried about a stock
bubble, they're worried about a bond bubble. I'm not sure anybody knows where to put their money right now, so --
LA MONICA: I spoke with someone last week who said that every asset pretty much out there is not cheap.
LAKE: Yes.
[16:10:00] LA MONICA: So, that's a big problem.
LAKE: Yes, it is. And we're probably going to see some volatility because of that. All right, Paul, great to catch up with you. Thanks so
much.
LA MONICA: Thank you.
LAKE: Paul La Monica for us.
Well, it was a tough session for European stocks as well. Shares in London and Frankfurt fell by more than 1 percent. It was the first chance
for these markets to react to a big political upset in Spain. Mariano Rajoy's Popular Party had its worst showing in local elections for 20 years
as voters turned against the prime minister's austerity program.
Ryanair shares finished 5 percent higher to hit an all-time high, record high, after some strong results. You'll hear from the CEO, Michael
O'Leary, a little bit later in the program.
Nigeria's crippling fuel crisis is nearing an end. And the petrol starts to flow and the country gets back online, we'll hear from a CEO who
says he's still losing $60 million a day.
(COMMERCIAL BREAK)
LAKE: Nigeria's worst fuel crisis in decades is ending just as a new president is due to take over. A crippling oil strike was called off after
an agreement between Nigeria's oil marketers and the government. The shortages forced businesses, radio stations, and cell networks to shut
down.
For the latest on the ground, Christian Purefoy joins us from Lagos. And Christian, do we have a sense now that the petrol is starting to flow
again that things are returning to normal?
CHRISTIAN PUREFOY, CNN INTERNATIONAL CORRESPONDENT (via telephone): I wouldn't quite call it normal, Maggie, but the petrol tankers are now on
the streets, and you do have petrol being sold at the stations. But really, you have -- what many call the paradox of plenty on show tonight
across Lagos and across Nigeria --
(AUDIO GAP)
PUREFOY: -- labor walkout by many petrol stations whose queuing (inaudible). And the guards trying to get hold of the petrol.
(Inaudible) are on generators, charge things like their mobile founds.
And Maggie, that's the good news. Yesterday, they said there was a strike, and that was basically Nigeria, Africa's largest oil producer,
Africa's largest economy, shutting down because of what basically was a handful of fuel importers who are only handling pay up to $1 billion by the
government, and the government saying that that money was on order. They don't know where that figure came from, Maggie.
LAKE: Christian, this incoming president has said the country faces unprecedented challenges. Has he even made any -- given any indication of
what he plans to do to address this?
PUREFOY: Yes, the challenges are just vast. And yesterday, a sort of display of Nigeria being shut down over a handful of men, or a handful of
companies is just one thing. You've got Boko Haram in the northeast, you've got billions of dollars of oil being stolen in the Niger delta. The
economy is going through an extra rough time.
As I said. Nigeria is Africa's largest oil producer, and the price of oil has plummeted. It's a question of where do you start?
And to be honest, we really don't know where Buhari, the next president, who -- he comes in (inaudible), but it will start. He's said
very little about what he wants to do, but there is enormous expectation on the part of the Nigerian people that what they're just going through now
the last couple of days is not going to happen again, Maggie.
LAKE: All right, Christian Purefoy with the very latest for us. Thank you, Christian.
[16:14:58] One CEO says he's still losing $60 million a day because of the Nigerian strikes. He is Kola Karim, chief executive of Shoreline
Energy. It is a firm with a large stake in Nigeria's oil fields. While the fuel delivery sector is getting back to normal, he says the oil pumping
sector remains on strike.
Kola Karim joins us now from London. Thank you very much for being with us. Do you believe this is just a delay and that you will see the
situation in the oil fields also now come back online once the deliveries start to clear? Or is there something else going on that we need to be
aware of?
KOLA KARIM, CEO, SHORELINE ENERGY INTERNATIONAL: I think the good news is I've just been informed by my team on ground in Lagos that the
strike has just been called off by the MPDC section of the workers union in the oil industry that's shut down all the oil fields that we have in
partnership with MPDC, which is the operating arm of NMPC, for the past nine days.
LAKE: So, that's good news, progress. But do you worry that this is just a temporary reprieve?
KARIM: I think it is, because the basic principle around why the strike came up in the first place is what we as investors in the services
and in industry, we don't understand.
They came up saying they want a reversal of the operatorship or the operatorship model that's been vested and given, granted by government to
the investors in these assets, which in itself is something that should make sense in helping increase production at this time, at this point in
time that Nigeria needs this income and revenue stream to support the ever- growing dependency on oil.
LAKE: As we mentioned, a new president coming into office. What would you like to see the government do to address some of the root causes
that were behind this recent fuel crisis we've seen?
KARIM: As I said a couple of weeks ago, we're faced with devils on all fronts. First and foremost in the sector, we have the theft -- the oil
theft is just colossal. That's one area the government needs to really focus on in trying to help investors like ourselves (inaudible) the damage
to our investment around this area.
The second invest -- the second support area we need and we're looking at is creating that enabling environment in making sure the gas supply is
flowing, free-flowing, and hence you have the nonstop blackouts.
We're seeing most of the power plants in the western part of Nigeria ground to a halt. We have not been producing gas, and our domestic gas
obligations have not been met because of the strikes.
LAKE: There are some who look at this and say that, as you point out, corruption is rife, and that government officials and employees of some of
the oil companies, the producers, the delivery, the marketers, are involved in the corruption. You know best what's happening on the ground there. Do
you believe this is true? And how difficult will that make that for the government to address this?
KARIM: You're right. The oil industry is a very complex industry in itself. But more importantly, when you put very professional people around
implementing professional decisions, we will get very good results.
The reality around the most important assets to Nigeria is one driving the diversification of the Nigerian economy. That in itself will shift the
dependency on oil to other areas that could generate dollar-ized income for sustaining the Nigerian economy. That's a very big focus from the incoming
government that should be a driver and support to the future growth of Nigeria.
LAKE: And that is a story that governments have been trying to sell to international investors. Do you worry about what this episode will do
to companies, to funds, to investors who are looking to put money to work in Nigeria? It's got to scare them off.
KARIM: Well, no, not really. You see, the important thing the world has come to realize is Nigeria's economy, even with all the negatives of
there has been no power, you don't have adequate infrastructure. The positives of this economy has been growing. So, imagine the growth of the
Nigerian economy if there's adequate power, if there's much better infrastructure. That's the positive.
We've got -- one major thing we've got to us as a people in Nigeria, and that is the population of Nigeria. It's of interest to any major
industrial concern globally, or business is looking for effective returns.
Because where in the world would you be looking at double-digit returns the today, apart from the big Asian economies? So, a place in a
country like Nigeria, is always going to be of very big importance to the global economy at home. One important area you need to look at. Nigeria
has got a very, very educated populace.
[16:20:00] That In itself is a supporting tool to any growth. So, it is and it shouldn't be a turn-off to investors into Nigeria. But what we
need is a continuously inclusion, a continuous support from government and the incoming government in creating that and sustaining that enabling
environment for all --
LAKE: Absolutely.
KARIM: -- in creating value for investors.
LAKE: And the government and the new president certainly going to have their work cut out for them. Kola Karim from Shoreline, thank you so
much for joining us tonight. Appreciate it.
KARIM: You're welcome.
LAKE: Well, China's markets are posting huge gains while the economy struggles to maintain growth. I'll be talking to a leading Asia expert
next.
(COMMERCIAL BREAK)
LAKE: China's markets are posting huge gains for this year. The Shenzhen Composite Index has more than doubled since January, if you
weren't paying attention, making it the world's top-performing stock market. The Hong Kong Exchange has gained 52 percent, and Shanghai is up
20 percent in the same period.
With these gains comes a puzzle. While markets are red hot, China's growth was 7 percent last quarter. That is the lowest since the financial
crisis.
Jamie Metzl is senior fellow at the Atlantic Council. He joins me now to look at the disconnect between China's markets and the economy. Jamie,
it's great to see you. So, why are we seeing these markets on fire when you could argue, although 7 percent looks good compared to a lot of other
parts of the world, we should say that, still it is slower than we've seen from China.
JAMIE METZL, SENIOR FELLOW, ATLANTIC COUNCIL: Those two stories are connected, because China's economy is slowing, all the numbers show that.
But why are the stock markets taking off?
A few reasons. One is because there's an opening. They've connected the Shanghai and the Hong Kong stock markets, which has given Chinese
investors an opportunity to invest outside of mainland China. And their money has bee locked in domestically because of capital controls. So that
creates a lot of opportunity.
And then, there's stimulus. The People's Bank of China has cut interest rates three times, and China has a state interest in moving the
big -- the money that they have in debt to equity. And so, they're pushing people into the stock markets.
And the investors in the Chinese markets, unlike here, which are very sophisticated markets, 80 percent of the people who are investing are
retail. They're mom and pop, a lot of illiterate people who are just throwing money into the stock market. And that's why you see these crazy
valuations --
(CROSSTALK)
LAKE: OK, so when you --
METZL: Yes?
LAKE: -- say that, that gives one pause.
METZL: Ding! Ding! Ding! Ding! Yes!
LAKE: Greenspan said it nicely years ago when he called it irrational exuberance.
METZL: Yes.
LAKE: Other people would say red hot speculative mess.
METZL: Yes.
LAKE: So, should we be concerned?
METZL: We should be concerned, because when you see a stock like China Railway, it's gone up 707 percent over the last year, a year ago,
analysts were looking at this stock, and they say, well, maybe it'll go at 15 or maybe 20 percent. But 700 percent rise is huge.
And then in Hong Kong, we've seen these valuations going up and down by 50, 60, 70 percent. So, it's really concerning. China has a lot of
opportunity for growth because there's a lot of captive money that has to go somewhere, and it's logical that it could go into equity markets.
LAKE: But not in a kind of gambling manner, when it's not being done in an educated way.
METZL: Yes.
LAKE: Because you create a situation where people get burned as you know from the sale.
METZL: It is gambling. And there's so much manipulation that happens in China. There are so many people who are triaging with insider
information --
LAKE: Right.
METZL: -- so that the little mom and pop guys, the guys who are putting their last R&D into the stock market because they've seen it go up
and up and up and they're afraid of missing out, and there are these rumors flying back and forth.
[16:25:03] So, there will be pain, and sadly, the people on the bottom of the pyramid will likely feel it the most.
LAKE: So, can the government handle this, manage this situation? Or are they also contributing to it? Because we saw some very weird action
with Hanergy.
METZL: Yes.
LAKE: The CEO has disappeared, some people suggesting because he spoke out against the government. How do you see this playing out?
METZL: Well, it's a conflicting story, because on one hand, the government is managing it. The government is really pushing people into
the equity markets as a way of addressing, as I mentioned, China's big debt problems. So -- and these interest rate cuts are all a way of growing the
equity markets.
At the same time, China realizes that if this bubble gets too big, there's going to be a crash, and it's going to fall back to them. So,
they're trying to do these two absolutely conflicting things simultaneously, and that's what's causing a lot of stress.
But as you said, Maggie, when you see these kinds of valuations, it's not like the value of China Railway has gone up 700 percent over the last
year. The valuations are out of whack, and eventually, gravity applies.
LAKE: Buyer beware --
METZL: Yes.
LAKE: -- is the lesson here, and for anyone sitting outside looking at the appeal, you're going to want to really do your homework, it sounds
like --
METZL: Absolutely.
LAKE: -- before you jump into that market.
METZL: Yes.
LAKE: All right, Jamie, always great to catch up with you.
METZL: Nice to see you.
LAKE: Thank you so much.
Well, staying in Asia, now, CNN has been given an exclusive tour of the perks enjoyed by a select few in North Korean society. They live in
the other North Korea, away from the poverty and repression that plagues most of the country. Will Ripley reports from Pyongyang.
(BEGIN VIDEOTAPE)
WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT (voice-over): The North Koreans took us here to show us their dolphins, but the audience really got
our attention.
(LAUGHTER)
RIPLEY: This is the kind of unscripted emotion we rarely see in North Korea. Government propaganda shows over-the-top adulation for the Supreme
Leader. But these smiles, these belly laughs, are real. Especially when our CNN photojournalist is pulled onstage.
This dolphinarium just one stop on our government-guided sightseeing tour, showing all the perks of Pyongyang's elite. Their lives drastically
different from millions of North Koreans we're not allowed to see, living in poor, rural areas, tending fields by hand. Experts say as many as half
the population hungry.
But when it wants to, North Korea and its young leader will spend millions on vanity projects, building extravagant amenities, like this
horse-riding club. No expense spared in this brand-new orphanage. Kids get regular visits from King Jong-un, a man they call father. But the
orphanage is half empty.
Most North Koreans in the capital live in drab housing blocks assigned by the government. We're shown only the newest, best neighborhoods, like
these apartments for elite North Korean scientists. They even have their own vacation resort. The government prepared to spend lavishly to reward
key personnel.
RIPLEY (on camera): That's you right there.
RIPLEY (voice-over): More special perks for those who train the elite. Senior professors at Pyongyang's most prestigious university get
these free luxury apartments.
RIPLEY: How does this compare to some of your friends' and family members' homes?
UNIDENTIFIED MALE (through translator): This is much better.
RIPLEY (voice-over): But even the best homes need solar panels, backup power during regular outages. We also visit the Supreme Leader's
lavish new water park, a gift for his people, featuring a life-size statue of his late father, Kim Jong-il, which must be revered, like a religious
artifact.
RIPLEY (on camera): Everybody who enters the water park first pays their respects to the late leader, Kim Jong-il, who died in 2011.
RIPLEY (voice-over): Park goers have nothing but praise.
UNIDENTIFIED MALE (through translator): I want more foreigners to come here, because I want them to be captivated by the great personality of
our Supreme Leader marshal, Kim Jong-un.
RIPLEY: These luxuries you'll only find in the showpiece capital, home to the most trusted, loyal citizens, proudly displayed as symbols of
national greatness, as millions of people struggle, are kept hidden from the world.
Will Ripley, CNN, Pyongyang, North Korea.
(END VIDEOTAPE)
LAKE: A heatwave in India has killed more than a thousand people. It won't let up for a week at the earliest, and it's highlighting the plight
of India's poorest citizens.
[16:29:48] (COMMERCIAL BREAK)
[16:32:05] LAKE: Hello, I'm Maggie Lake. There's more "Quest Means Business" in a moment.
He's designed the iPod, the iPhone and the Apple Watch. Now Apple design chief Jony Ive focuses on the big picture.
And Ryanair's CEO tells me how being nice to his customers is paying off. First, the headlines this hour.
Iraqi forces are pressing ahead with a major offensive against ISIS. Shia militiamen, government troops and Sunni tribesmen are trying to win
back territory in the provinces of Anbar and Salahuddin. Iraq's defense minister says they now have Ramadi, the capital of Anbar, surrounded from
all sides.
Syria's antiquities chief says ISIS has so far spared the historic treasures in Palmyra after overrunning the city last week. He tells CNN
this new ISIS video showing the ruins intact is accurate according to his sources on the ground. The world watched with alarm as ISIS stormed
Palmyra, hoping it would not meet the same fate as other historical sites the militants have destroyed.
ISIS has reportedly executed hundreds of people since seizing control.
More than 1,100 people have died in India due to soaring temperatures. Authorities are warning people to stay inside during the day and stay
hydrated. We'll have much more for you on this story in just a moment.
Malaysian authorities are exhuming remains from more than 100 gravesites believed to belong to migrants. The graves were discovered in a
forest on Sunday along the Thai border. Officials say there are multiple bodies in each one. Along with the gravesites, 28 human trafficking camps
have been found.
BB King's two daughters have raised questions over the way their music legend father died. They say he was poisoned by his closest associates.
King passed away earlier this month. He was 89. Authorities say there was no evidence of foul play in the initial autopsy.
As we have been reporting, temperatures in India are soaring to lethal levels. The heatwave gripping the southeastern part of the country has
already killed more than 1,100 people in just under a week. And weather experts say there is no relief in sight. Mallika Kapur has our report.
(BEGIN VIDEOCLIP)
MALLIKA KAPUR, CNN CORRESPONDENT: An extreme heatwave is sweeping across India. Temperatures are soaring - stretching (ph) 48 degrees
Celsius - that's 118 degrees Fahrenheit in some places.
The states of Andhra Pradesh and Telangana in the South are the worst hit. The capital New Delhi, part of Rajasthan in the West and Bengal in
the East are reeling from the heat too.
[16:35:01] The most vulnerable? People who don't have access to shelter - the homeless, construction workers, beggars, migrant laborers who
often live on the streets and the elderly.
Local disaster management officials in some starts are urging people to stay indoors between 10 a.m. and 4 p.m. They are asking them to wear
cotton clothes, to use caps and umbrellas. And they're also distributing water and buttermilk to help people stay hydrated and to remain cool.
The heatwave exposes India's weak spot - power. Around a third of India's 1.2 billion people don't have reliable access to power. That means
they don't even have a fan to cool off under. It also means those who can afford air conditioners are using them for much longer. This surge in
demand for power often leads to power cuts in many parts of the country, making a terrible situation worse.
Unfortunately, relief is still far off. Meteorologists say the monsoon rains which will no doubt bring down temperatures won't hit until
at least the end of the month. Mallika Kapur, CNN Mumbai.
(BEGIN VIDEOCLIP)
LAKE: North America is dealing with its own round of deadly weather. More than 20 people have been killed as a powerful storm sweeps through
Texas, Oklahoma and parts of Mexico. This is Houston where more than 30 centimeters of rain fell in just 24 hours.
What had been roads became rivers and lakes. At least a dozen people are still missing. Jennifer Gray is in Wimberley, Texas right now. And,
Jennifer, it looks like the sun is out, but often when we see these flash flooding situations, they come so quickly, people are just not prepared.
JENNIFER GRAY, CNN WEATHER CORRESPONDENT: Exactly. That's the problem with flash flooding. When it comes to weather, more people die
from flooding than anything else. And it's because the water comes up so fast. You have torrential rains - they're all flowing in the same rivers
and creeks. They rise very, very quickly and you have little time to seek higher ground.
And so this is what's left. You see homes completely wash off of their foundations - just slid right off - because of the floodwaters. In
fact, there is a water mark and it is about right to that second story of the house. And so you can imagine how high the water got. We're up on a
bluff and this is more than 13 meters above where the river sits.
And so look down there. The water has gone down quitter a bit. But during its worst point over the weekend it got up to about 13 meters before
the flood gauge broke. So we don't know exactly how high it went. It could have gone even higher. But now the water's all pushing downstream
and that's adding insult to injury with the flooding in Houston when you add about a meter of rain on top of that, then we're talking about major
flooding there as well.
So we do have sunny skies now - the weather is nice, we're not expecting much rain today or tomorrow. However, more rain in the forecast
as we go through the end of the week through the weekend, Maggie, and that has major concerns here across portions of Texas with additional flooding,
with all of the rivers running high already.
Right now we have 3 to 400 homes completely destroyed in this area with about 1,000 more heavily-damaged and so more rain in the forecast is
the last thing people want to hear, Maggie.
LAKE: So what are officials telling people to do at this point, Jennifer?
GRAY: Well basically they're cleaning up, they have crews out here, we've been getting - they've been getting - rid of the trees, the power
lines. As far as residents go, they're telling them to just watch the forecast. If you're in an area that's prone to flooding, especially areas
that we saw over the weekend, you need to seek higher ground. A lot of people are staying in shelters until the threat is over, but the best thing
to do is just be very aware of what's going on around you - the forecast and when it starts raining very heavily, seek higher ground immediately.
LAKE: Absolutely, and stay out of your car. We see so many times people think they're going to be able to beat it and that's where so much
of the trouble comes from. Some just heartbreaking stories coming out of that region.
Jennifer, thank you so much. Jennifer Gray for us.
Well less paperwork, more big ideas. That's what Apple wants for its top design guru and they're prepared to give him plenty of help to achieve
it.
(COMMERCIAL BREAK)
[16:41:25] LAKE: He is the design genius behind Apple's most famous products. Now Jony Ive is getting a promotion so he can spend less time
doing paperwork and more time designing the next iPhone. Ive seen here showing off his designs to Tim Cook and Dave Grohl from the "Food Fighters"
is becoming Apple's first-ever chief design officer.
He's regarded as the creative force behind products like the iMac, the iPod with its revolutionary Click Wheel and most recently the Apple Watch.
In a recent interview with "The New Yorker," Ive said the past year had been the most difficult one yet after 23 years at the company.
Now Apple says his new role will let him delegate more responsibilities and focus entirely on design. Mark Murphy is the CEO of
Leadership IQ. He joins me now from CNN Center. Thank you so much for being with us, Mark. I think the first thing - call me cynical -- but the
first thing I thought of is this a promotion or are they sort of gently moving him out of the way? What do you think?
MARK MURPHY, CEO, LEADERSHIP IQ: Well, his really goes both ways. Companies have done it, you know, two different ways Sometimes you'll see
that top executive stand into a more abstract role just so they can kind of ease them out gently. But one of the things we know about top executives
is that they have a great deal of difficulty throttling down their spirometer.
That is, they like to work at an intense pace. And when you take somebody like this and say, `Hey, keep thinking strategically, think about
where the next generation of Apple goes, work on the business as opposed to in the business. This is sort of the ideal role for many executives.
LAKE: I think a lot of managers are sitting there thinking can you do that for me too? I'm curious -
MURPHY: (LAUGHTER).
LAKE: -- do you think this is an issue because he is a design person - there's a lot of creativity there - or is this a struggle that a lot of
managers even in other types of businesses face? That they just get bogged down with the administrative part of running a company?
MURPHY: Yes, what's interesting is that when we ask executives in our research, about 70 percent of them say that far too much of my time is
spent on non-value added kinds of work - bureaucracy, miscommunications, dealing with handoffs and trying to babysit people rather than being able
to do the thing that I was really hired to do. To bring my insight, to bring my strategy.
And, again, when you look at the frustrations that many executive have, it's generally of that operational bureaucracy stuff. It's not
having enough time to focus on the big picture of creative ideas.
LAKE: So why don't we see more roles like this? Why aren't there - you know - once you get to a certain level, why aren't you able to escape
the trappings and leave that stuff to sort of lower management, middle management or HR? There's a million departments in every company. Why
does it end up on a manager's desk or on a sort of top executive's desk?
MURPHY: Yes, part of it is the basic idea if you want it done right, we do it ourselves. And this is a mindset that just infects a great many
executives that, listen, `Yes, I'm going to have this brilliant design but who's going to build it? Yes, you know, I designed the Apple Watch - great
- but now who else is there who's going to oversee it quite like I would?'
So part of it is this drive for achievement, part of it is a drive for control and part of it is that when you look at the pressures from Wall
Street and other financial markets, they're generally saying, hey listen, `Put your best talent where the money is' and oftentimes markets have a
difficult time seeing that the money comes from that longer-term creative strategic thinking.
[16:45:01] LAKE: That's right. We're all control freaks. We knew somehow we were responsible for our own fate even though we complain about
it.
To bring it back to Apple though, this is a company that had a culture where Steve Jobs famously sort of had a hand in the nitty-gritty, in the
minutia and people took a lot of comfort for that. Do you think they're going to be ready for somebody who has a more hands-off approach that maybe
you don't see as often"?
MURPHY: I think so simply because they did it so well with Tim Cook. And when they transitioned and Tim Cook took over, it was really Tim
driving the operational part and that's when you really saw with Apple a divergence between and creative over here and operational over here.
And so they've proven that they could do creative, they can do the operational piece and if they do it as well as they handled things with
Tim, I think they'll be in perfectly good shape.
LAKE: Yes, absolutely. Maybe we'll see a little - -a few more of those so-called promotions coming our way if they pull it off. And in
articles he said he's an awful big fan of cars so we'll see where this leads.
Thank you so much for joining us today. Appreciate it.
MURPHY: Thanks for having me.
LAKE: Well the leaders of France and Germany have struck an agreement to bring about a tighter political union in the Eurozone. Notably their
plan won't reopen any E.U. treaties, the same treaties British Prime Minister David Cameron has been campaigning to change.
David Cameron made his displeasure known on Monday while dining with the European Commission president. Mr. Cameron told Jean Claude Juncker
that British people are not happy with the status quo.
As he fights for better terms, the British prime minister is embarking on a whirlwind tour of Europe. Thursday he'll meet his counterparts in
Copenhagen, the Hague and Paris and continue on Friday Warsaw and Berlin
Mr. Cameron says he plans to speak with all 27 E.U. leaders before the next European Council summit at the end of June. That's going to keep him
busy.
Well securing a quote "better deal" for the U.K. with the European Union is just one campaign promise David Cameron is looking to fulfill.
Nino dos Santos looks at the economic challenges and priorities for the new government.
(BEGIN VIDEOCLIP)
NINA DOS SANTOS, CNN ANCHOR AND CORRESPONDENT: With the election honeymoon now over and David Cameron's second term underway, it's time for
Britain's prime minister to figure out how to honor the promises that put his Conservative Party in power.
Among the top priorities in his entrade (ph) - reigning in the deficit which at 5.7 percent of GDP, it's the third highest in Europe and also 2
percent above E.U. limits. So much for the economy being on the right track. Well Cameron seems to have promised to put the public finances back
in the black by 2019, indeed to post a surplus thereafter.
But having ruled out tax heights, cuts will have to be made. One proposal - to save almost $19 billion from the welfare bill. Still, until
July the 8th when the Finance Minister George Osborne presents his special budget, who knows where the ax will really fall.
PAUL JOHNSON, DIRECTOR, INSTITUTE FOR FISCAL STUDIES: Obviously the easy cuts have been made, to the extent there were any, already. We've
already seen cuts of 18 to 20 percent in a lot of these departments and similar-sized cuts to come again at a time when we hope wages will be
rising and some of the other costs facing the public services as a result of an aging population are growing as well.
DOS SANTOS: One way of helping to tackle the gap is by boosting productivity - the Achilles heel of the U.K.'s otherwise resilient labor
market.
With the fastest growth rate among G7 nations and unemployment at a seven-year low, surprisingly the country's firms and factories aren't as
efficient as they could be. Among the group, just Japan fares worse and the pressure is on to find a solution.
JOHNSON: It also matters to the government in terms of the public finances. If productivity doesn't start to take off, then the economy
won't grow, then we won't sort out the deficit even with the billions of pounds of spending cuts that we're talking about.
DOS SANTOS: But making the numbers work could turn out to be only half of the task. Negotiating the country's relationship with the E.U.
might be harder after Cameron promised Britons a referendum on membership by the year 2017.
With business warning of the uncertainties that a U.K. exit could cause, the prime minister better hope that his economy is finally on a sure
footing by then. Nina dos Santos, CNN London.
(END VIDEOCLIP)
LAKE: Once troubled Ryanair is reporting record profits. I've been speaking with the airline's CEO about the company's turnaround and the
upcoming price war. What he had to say next.
(COMMERCIAL BREAK)
[16:51:08] LAKE: Aer Lingus is now a step closer to being sold to IAG. The Irish government says it will accept an offer from the parent
company of British Airways for its 25 percent stake in Aer Lingus. It will now go to a vote in the Iris parliament where there has been plenty of
opposition to a sale.
IAG will also need to persuade Ryanair to sell its own stake in Aer Lingus.
Ryanair is flying high on good news. Europe's biggest budget airline reports profits were up 66 percent for the year ending in March. It is a
big change after the company faced profit warnings in 2013.
The company lowered fares and mounted a charm offensive to improve customer service, moves that the airline says lured millions of customers.
Ryanair says it will be the first European airline to serve more than 100 million customers a year. Profits also benefited from low fuel prices.
That cut the company's costs by 5 percent.
I spoke with Ryanair's CEO Michael O'Leary earlier and asked him if the carrier's charm offensive is enough to compete with European airlines.
(BEGIN VIDEOCLIP)
MICHAEL O'LEARY, CEO, RYANAIR: I think what we've established in the last ten years in Europe is that nobody can compete with Ryanair on price
or on cost. I think we did have some gaps in our service delivery but were moving quickly over the last 12 months to fix those service issues.
And we've been, frankly, surprised at the - at the very favorable response we've received from our customers. Load factors are up five
points to 88 percent, traffic is up 11 percent last year to 90 million passengers - a new record.
LAKE: Yes, that charm offensive a lot of people think really did pay off. But I wonde3r if you're in a price war, you know, what guarantee will
customers have that you won't repeat the mistakes of the past in order to hang on to market share?
O'LEARY: Because one, the secret of price wars - the lowest cost provider always wins and that in Europe is Ryanair. And I think what we've
learned in the last 12 months is that by listening to our customers, responding and fixing the things frankly that we used to irritate them with
works.
It's been tremendously good for our business and it gives us a platform with which we're actually going to take the price war to other
legacy airlines in Europe. We're moving into more primary airports enrollment - Brussels and Lisbon and Cologne and Berlin.
We're bringing choice and competition, and customers are switching from legacy high-fare legacy carriers to Ryanair - and they're millions.
LAKE: And I know you were also trying to go after the business customer with some of those changes that you made. What is your passenger
mix? Are you seeing a pickup in business travelers or is it still mostly leisure?
O'LEARY: No, very much so. I mean 27 percent of our traffic last year was traveling on business. Now we launched a business plus product,
flexible tickets, reserve seating, priority boarding and, you know, to accommodate the needs of those customers.
We're seeing them switch to a premium product which is our new business plus service, but we'd like to convert more and more that we have
an objective over the next five years to convert 10 percent of our total passenger base to traveling on our business plus service.
But we haven't forgotten families either. We've also rolled out a family extra product which has been phenomenally successful by offering
families traveling with children discounts on their seats, bags etc. We're trying to welcome all strands of our customer base as well as growing into
new markets.
LAKE: Yes, and I know as a mom with kids it is hard to get that family to afford to take a flight these days with what fares -
O'LEARY: Sure.
LAKE: -- have been doing. Michael, you're sitting here in New York. Any plans for a transatlantic service?
O'LEARY: We'd like to but unfortunately there's no long-haul aircraft available at low prices. I mean, the three Gulf carriers have mopped up
most of the long-haul aircraft production for the next four or five years. It's something that's on our radar, but we have no plans in the next three
or four years to do it.
Instead, we've ordered another 200 Boeing 737 200 MAX series aircraft. It means we'll take delivery of nearly 400 aircraft from our partners
Boeing over the next eight years and we grow from 100 million passengers this year to about 160 million passengers by 2022/2023.
[16:55:09] And the good news for our customers in Europe is that means even more low prices, lower fares on every seat and better service in
Ryanair.
(END VIDEOCLIP)
LAKE: Malaysia Airlines is expected to announce plans to cut around one-third of its staff. The layoffs come as the airline wraps up a
restructuring plan. It's trying to recover from two high-profile disasters last year. The cuts could affect as many as 8,000 of Malaysia Airlines'
20,000 employees.
And we will be right back after this break.
(COMMERCIAL BREAK)
LAKE: Silvio Berlusconi, the 78-year-old former Italian prime minister has never really acted his age. And once again he's staying
current by creating an account on the photo-sharing app Instagram. He's posted dozens of photos and gathered more than 20,000 followers.
You can see shots of Berlusconi with his dog, his 29-year-old girlfriend and supporters. The former prime minister is clearly trying to
win over voters for his Forza Italia Party before Sunday's election.
U.S. stock markets fell today. The S&P 500 had its biggest percentage drop in three weeks. The Jones Industrial average fell 1 percent - it's
biggest fall in a month.
The main corporate news today - Charter says it will buy Time Warner Cable in a deal that will create the second largest cable provider in the
country. Shares in Time Warner Cable rose more than 7 percent, hitting a six-year high. Charter shares were up around 2 and 1/2 percent.
And that's "Quest Means Business." I'm Maggie Lake in New York.
END
