6 ★ FINANCIAL TIMES Friday 20 November 2020

Antonio Weiss March ructions put the spotlight back on role of non-bank institutions in trading y MARKETS INSIGHT

Amazon drone Cold steel Thyssenkrupp takes axe to 5,000

more jobs after falling to annual loss of €5.5bn
UK watchdog
holds key to
ambitions fly Virgin’s £31bn
tie-up with O2
through a Javier Espinoza — Brussels
Kate Beioley and
Nic Fildes — London

rough patch The UK competition watchdog has

taken full control over the review of a
proposed £31bn merger between Vir-
gin Media and telecoms operator O2
and agreed to fast-track its probe after
both companies sought to speed up the
process when it moved to London from
3 R&D and production staff shed Brussels.

3 Retailer resorts to external help
Dave Lee — San Francisco
Amazon is laying off dozens of R&D and
manufacturing staff working on its
delivery drone project and has turned to
outside help to get its much-delayed
ambitions off the ground.
In recent weeks the company has
reached tentative deals with two com-
panies to build parts for what has been
billed as a future delivery method for
smaller packages.
Terms of the agreements with FACC
Aerospace of Austria and Aernnova
Aerospace of Spain were being finalised,
said a person familiar with the plans.
Additional deals with third parties
Prime Air plans to operate
a drone that can fly up to
15 miles and carry parcels
weighing up to five pounds
could be reached soon, the person said,
following Amazon’s “request for pro-
posal”, sent to a number of companies in
the drone sector over the past year.
Deliveries at scale by drone, envi-
sioned by Jeff Bezos, founder of Ama-
zon, in 2013, are still a “years away”
prospect, said the person, with develop-
ment set to progress in the new year.
Last year, Jeff Wilke, Amazon’s head
of worldwide consumer business, told
an audience in Las Vegas that drone
deliveries were imminent. “We expect
to scale Prime Air both quickly and effi-
ciently, delivering packages via drone to
customers within months,” he said in a
blog post accompanying his address.
Amazon characterised the lay-offs as
part of a transitional phase for the unit,
which this year received US regulatory
approval to begin limited testing.
“As part of our regular business oper-
ations, we are reorganising one small
team within our larger Prime Air organ-
isation to allow us to best align with the
needs of our customers and the busi-
ness,” said the company. “For affected
employees, we are working to find roles
in the areas where we are hiring that
best match their experience and needs.”
Amazon would not disclose how
many staff it now had working on the
drone project. At the time of writing, the
company’s public-facing recruitment
site lists 57 open roles on Prime Air,
mostly related to software and systems.
FACC and Aernnova specialise in
making composite components for Air-
bus, Boeing, Bombardier and other avi-
ation clients. Neither responded to
requests for comment on the deals.
Amazon’s Prime Air will operate a
hexagonal electric drone that can fly up
to 15 miles and carry packages weighing
under five pounds, according to details
released in mid-2019.
In March, Amazon said it was bring-
ing in David Carbon, a former Boeing
executive, to replace Gur Kimchi, who
had led Prime Air for seven years.
David Benowitz, head of research at
DroneAnalyst, said Amazon is trailing
what is now a highly competitive field,
with rival Walmart set to begin trialling
deliveries with Zipline, a drone com-
pany in San Francisco. “It’s not meeting
the lofty goals and the original vision
quite yet,” he said.
Amazon’s intended approach is to
land its drone near the customer’s
home, presenting obvious concerns
around safety.
The US Federal Aviation Administra-
tion is making prospective delivery
drone operators meet strict criteria in
order to begin even limited testing. In
August, Amazon received its Part 135
certification allowing some highly con-
trolled testing to begin, though the com-
pany has not yet shared details of where
it intends to run its flights.
The group said it expected a further loss of €1bn this financial year as restructuring costs spiral — Wolfgang Rattay/Reuters
Joe Miller — Frankfurt
Thyssenkrupp fell to a full-year loss
of €5.5bn and said it would cut 5,000
more jobs as pressure mounts to
speed up the sale of underperform-
ing businesses.
The Essen-based company, which
employs 100,000 people, warned that
it expected a further loss of at least
€1bn this financial year as restructur-
ing costs spiral.
Unable to escape a steady decline
over the past decade, Thyssenkrupp
sold its lifts business to a private
equity consortium for €17bn in Feb-
ruary, to help pay down debt and fund
pension liabilities.
The group has continued to bleed
cash in its remaining businesses. Free
cash flow, excluding any income from
mergers, collapsed to negative €5.5bn
in its most recent financial year,
which ran to the end of September.
Having cycled through three chief
executives in 15 months, Thyssen­-
krupp is under the leadership of an
outsider, former Bosch executive
Martina Merz, who gave up the chair-
manship of the company’s supervi-
sory board to take the executive reins
in October 2019.
In May, Ms Merz outlined a restruc-
turing plan that would result in sev-
eral smaller businesses — with com-
bined sales of more than €6bn a year
and 20,000 workers — leaving the
group, and the remaining units being
run under a loose holding structure.
The extra job cuts announced yes-
terday bring the total number of roles
at risk to 11,000, almost 7,000 of them
in Germany. Thyssenkrupp refused
to rule out forced redundancies. “The
next steps could be more painful than
the previous ones,” Ms Merz said, “but
we will have to take them.” Her “pri-
mary objective” was to win back the
confidence of capital markets and
“stop the bleeding”.
Shares in Thyssenkrupp, which had
already lost roughly 80 per cent of
their value over the past three years,
fell 3.4 per cent yesterday.
Last month the group revealed it
had received an approach for its steel
unit, which employs 27,000 and made
a loss of €946m in the last financial
year, from UK mogul Sanjeev Gupta’s
Liberty Steel. Neither group disclosed
details of the approach.
The division, which has been strug-
gling to compete against cheaper
imports, has been hit by its reliance
on business from the car industry.
The sector, which is forecast to con-
tract by almost a quarter in 2020,
accounts for roughly 40 per cent of
Thyssenkrupp’s steel sales.
The group is in exploratory discus-
sions with other steelmakers, includ-
ing Sweden’s SSAB, and is talking
to Berlin on potential financing, say
people familiar with the matter.
Lex page 18
Liberty Global and Spanish group Tele-
fónica, the respective owners of Virgin
Media and O2, struck a landmark deal
to combine their British operations in
May, a tie-up that would possibly have
been overseen by the European Com-
mission. The O2-Virgin agreement is
expected to reshape UK telecoms by
uniting the country’s second-largest
broadband network with the largest
mobile operator.
“These are incredibly important UK
markets, that continue to evolve, and
the deal needs to be carefully reviewed
to make sure that consumers are pro-
tected,” Andrea Coscelli, chief executive
of the Competition and Markets
Authority, said yesterday.
The watchdog said it would fast-track
the process unless it received any objec-
tions to that decision. It is accepting
views on how the deal could affect com-
petition until November 26.
News that the CMA would oversee the
process and that Virgin and O2 had
requested that it go straight to an in-
depth probe, for a decision by the mid-
dle of next year, was first reported by the
Financial Times.
Liberty Global and Telefónica con-
firmed in a joint statement the request
to fast-track the process. “We have been
in close contact with the CMA and
Ofcom throughout this process and are
confident the transition will be seam-
less. Our view remains that this trans-
action is pro-competitive and we con-
tinue to expect closing around the mid-
dle of next year,” they added.
However, Brussels’ decision to refer
the deal to the CMA still comes as a blow
to the telecoms groups, who had been
hoping for a swift decision from the
commission.
Both companies are banking on the
CMA treating the merger of the cable
broadband and mobile companies as
similar to BT’s £12.5bn takeover of
mobile group EE in 2016, which was
cleared by the watchdog without requir-
ing any remedies.

Contracts & Tenders

Google adopts bank manager role in mobile deal with US lenders
credit unions in the US. Apple’s ground-
Inside business breaking credit card with Goldman
Sachs has become the model for
Technology arrangements like this, as well as a
strong motivator for other financial
Richard institutions to get off the sidelines and
find a way to work with Big Tech.
Waters Google’s would be the first regular Big
Tech bank account, though almost cer-
tainly not the last.
A lot has changed since Google first
showed up at the financial services
There is an obvious precedent for this
alliance. It closely follows the deals that
Apple struck for the iPhone more than a
decade ago, when mobile operators
lined up to sell the device. Those
arrangements left the tech company
with full control over the user experi-
ence, and it turned the phone company
— or in this case, the bank — into the
provider of an essential, but increas-
ingly undifferentiated, “back-end”
service.

A
decade ago, when the big-
gest consumer tech compa-
nies first showed an inter-
est in financial services, the
banking world dug in for an
all-out war. Now that Big Tech is finally
stepping deeper into finance, hostilities
between the two camps have eased. But
given the scale of the tech companies’
ambition, that is unlikely to be the end
of the story.
Google’s attempt to promote a new
style of mobile bank account is the latest
sign that a new rapprochement is in full
swing. Like a number of the internet
giant’s services over the years, Google
Pay has been through long fallow peri-
ods without much in the way of innova-
tion. It is used on only around 4 per cent
of the 2.5bn Android devices around the
world, according to Statista.
The app is now going through a two-
stage revamp. The first, this week, adds
new bells and whistles to make it more
engaging as Google tries to make up for
lost time. It will now be a place to keep
tabs on your bank and credit card
accounts, as well as a conduit for Google
to serve up personalised offers from
merchants.
The second step is the more ground-
breaking. Next year, users will be able to
open and manage a mobile bank
account directly from the app, starting
with Citibank and 10 other banks and
party. At the time, smartphones were in
their infancy, and the tech companies
were open about their goal of disrupting
any industry they entered. The
upheaval they had already caused in the
media world marked them out as unre-
liable partners.
Distrust of Big Tech is still strong. But
the reach of their mobile technology
and the changing
expectations of Distrust of Big Tech
users have made
them impossible to remains strong but the
ignore, and finan- reach of their mobile
cial services of all
kinds are being technology has made
reimagined for a them impossible to ignore
younger genera-
tion brought up on smartphones.
The outlines of the Google arrange-
ment highlight the common ground
that tech and financial services compa-
nies have found. The banks will main-
tain the accounts, while Google Pay will
act as the “front end” for accessing and
managing them. That means the user
experience will essentially be owned —
and branded — by Google.
The account will keep the branding of
the bank, but opportunities for differen-
tiation seem minimal. The accounts —
all carrying the name Plex, as in Citi Plex
— will need to meet a set of specifica-
tions set by Google, for instance, no fees
and no minimum balance.
As AT&T found after striking the first
partnership with Apple for the iPhone,
though, there is still a lot to gain from
tapping a big new market. For Citibank,
this could become a way to access to
retail deposits at scale — as well as to
draw in millions of new customers.
Keeping the ability to cross-sell other
financial products to Plex account hold-
ers will be key. The bigger question is
how far Google will want to go in serving
all of its users’ financial needs.
For now, it may own the customer
experience, but it won’t own the cus-
tomer. The transaction data remains
with the bank, and Google’s ability to
use it is severely limited. Only in one
narrow way — and then, only if a user
opts in — will it get to make use of trans-
action data, to serve up personalised
offers from other merchants inside the
Pay app. A full understanding of its
users’ financial lives would be hugely
valuable to Google in its broader adver-
tising business.
For now, tech companies such as
Google see much more to gain from
working with the banks than trying to
take them on. Their willingness to turn
these into lasting relationships of
mutual interest will be an important
test of how trustworthy they will seem
to other industries in future.
richard.waters@ft.com