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Leading Japanese Shippers to Merge Container Operations

Cargo Container The three largest shippers in Japan have agreed to merge their container operations to enable them compete better amid slump in global trade.

Nippon Yusen K.K., Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha announced in a joint statement released in Tokyo on Monday plans to merge their respective container shipping operations in order to become a major global player.

The merger, which still has to be approved regulators in several countries, will lead to the emergence of the sixth-largest container shipping player in the world. The new company is expected to control around 7 percent of the global trade.

“With joint shipping and alliances, the scale of our operations and business styles, we have many things in common,” the statement read. “We thought it would be easier to utilize others’ strengths this way.”

Shipping companies have not fully recovered since the financial crisis of 2008. Demand for commodities has slumped. Industry players have also inundated the market with capacity and drove down charter rates in a bid to maintain market share. More and more shippers are now entering into alliances to guard against huge losses that could drive them out of business.

A recent major causality of the downturn is the South Korean ocean carrier Hanjin Shipping Co., which filed for bankruptcy protection late August. This, some analyst believe, must have been considered a warning shot to Japan’s three largest shippers.

“The way the industry is going, combining operations is a good thing,” said Rahul Kapoor, a director at Singapore’s Drewry Financial Research Services. “China has combined its two shipping lines. The Japanese need to combine to survive in this environment.”

The shippers said on Monday that they expected to report operating losses for their full fiscal year. Kawasaki Kisen and Nippon Yusen forecast operating losses of 44 billion yen and 25.5 billion yen respectively. Mitsui O.S.K. expects to report 15 billion yen in losses.

Shares of Nippon Yusen and Mitsui O.S.K jumped significantly higher on Monday in Tokyo. Bloomberg reports Kawasaki Kisen also ended the day 0.4 percent up after rising earlier by as much as 10 percent.

The companies said they intend pumping 300 billion yen into their joint venture. Nippon Yusen will own 38 percent stake in the new company, while the other two shippers will get 31 percent apiece.

The new corporate entity, which is to be established in July 2017, will commence operations in April 2018 with 256 vessels. It is expected to be the second-largest shipper in Asia, after China Cosco Shipping Corp., and will have roughly 2 trillion yen ($19 billion) in sales.

Shipping companies are using different approaches to stay afloat amid the slump in the global container business. While some shippers such as A.P. Moeller-Maersk A/S are undergoing restructuring, others like Hapag-Lloyd AG and CMA CGM SA have merged smaller rivals into their operations.

The three Japanese shippers will not have their bulk-cargo shipping businesses affected by the merger.

The transaction requires approval of regulators in the European Union and countries, such as Japan, U.S., and China.

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FOS Received More Than 5,000 Payday Loan Complaints

FOS

Is it the fact that more consumers are aware of their rights or is it because the government is cracking down even more on the payday loan industry? In any event, the payday loan industry is being complained about a lot by customers this year, says a new report from a government watchdog.

Between April and September 2016, the Financial Ombudsman Service (FOS) reported that it had received more than 5,000 complaints about payday loans. This is up from 3,200 payday loan complaints made between April 2015 and March 2016, which is an astounding and significant increase.

What exactly are borrowers complaining about? It seems the primary reason is the affordability and cost of these short-term, high-interest loans. This is something that has plagued the payday loan industry for years, and one of the reasons why the government started to rein in these companies.

Gillian Guy, CEO of Citizens Advice, suggests that these complaints are still being made because payday loan businesses refrain from performing background checks to ensure the borrowers can pay back the funds without accruing any substantial interest rate charges and other exorbitant fees and charges.

Experts warn that if lenders don’t do background checks then it’s possible that a great number of their customers can’t afford the terms of agreement.

He further noted that, even though the group has assisted borrowers in reducing the amount of money they owe to payday loan companies thanks to the Financial Conduct Authority (FCA), many lenders are “failing to carry out basic checks to make sure people can afford to pay back what they borrow.”

The organization has repeatedly urged the FCA to mandate every payday lender to perform financial checks on applicants.

With the successes it has already made, Gillian believes the FCA can add to its initiative by making businesses that offer cash services like payday online more responsible with better rules.

“This would mean lenders would be required to check whether borrowers can afford a loan. The FCA also needs to make sure people aren’t getting into difficulty because of other forms of high-cost credit,” said Gillian in a statement. “We have helped more people with rent-to-own debts than last year, with many reporting problems with meeting repayments. Extending the payday loan price cap to the rent-to-own market could protect consumers from the high cost of these agreements and stop people falling into worsening debt.”

Since 2014, the FCA has implemented new rules and regulations for payday loan businesses. The results of these endeavors have been greater fines, more compliance and even lenders leaving the United Kingdom. The unintended consequence, however, has been a greater number of online lenders.

In other words, the likes of Wonga need to adapt to a much more regulated financial landscape.

Opponents of payday loans, whether they’re in Europe or North America, argue that these alternative financial products do more harm than good for the most vulnerable in society. It is regularly argued that they send low- and middle-income households into endless cycles of debt, and that more consumer protection rules are needed.

Payday loan proponents, however, say quite the opposite: payday loans are needed now more than ever. Because of the soaring cost of living, stagnant wages and unforeseen circumstances that arise, many borrowers need the option of payday loans, especially if they are unbanked or underbanked.

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Amazon Profits Disappoint, Shares Tumble

Amazon Building

Amazon’s third quarter results failed to live up to expectations, with these sending the shares of the retail giant on the downward curve.

The online retailer on Thursday reported earnings of $252 million, or 52 cents a share, in the third quarter. The profit declared was the lowest since the $79 million, or 17 cents per share, reported in the same quarter a year ago.

Earnings widely missed the expectations of Wall Street. In a poll by Thomson Reuters, analysts had predicted earnings of 78 cents a share.

The disappointing profit saw Amazon shares crashing down by about 7 percent in after-hours trading on Thursday.

The lower-than-expected earnings were the result of increased costs, as the company stepped up on investments that would enable it to meet customers’ demand. It explained that it spent money on building new warehouses and shipping items faster.

Amazon has added 26 order fulfillment centers so far in 2016, compared to 14 in the whole of last year. And of that total, 23 were opened in the recently-concluded quarter.

The company has also splashed the money to improve on how fast orders are delivered to those on its $99-per-year Prime membership program, who are believed to spend twice more money on the platform than those who are not part of the program. Shipping costs jumped 43 percent to $3.9 billion during the quarter.

Chief Financial Officer Brian Olsavsky said on a media call on Thursday that the increased investment was aimed at making Amazon ready to handle high number of holiday orders that are expected in the fourth quarter.

Amazon expects to make more huge investments through the end of 2016.

“Amazon is still in investment mode, and the Street should not necessarily expect linear growth in profitability,” Colin Sebastian, analyst at Robert W. Baird & Co., said.

Sales of $32.7 billion posted during the quarter merely outstripped operating expenses which rose by 29 percent to $32.1 billion. Operating margin was just 1.8 percent, down from 4.2 percent in the preceding quarter.

The major delivery partners of the retailer were not able to deliver orders on time during the holiday season of 2013. That made it to increase investments on developing its own shipping business. It has added more delivery capabilities in 2016 while also arranging capacity with partners, according to Olsavsky.

Amazon is buying branded truck trailers and leasing about 40 planes to carry goods, with its CFO saying: “We want to control our own destiny.”

The company has been shipping more items because of the expansion of Fulfillment by Amazon, a program which handles shipping of merchandise ordered from third-party sellers. The increase was partly responsible for the rise in investments.

In spite of earnings coming in lower than expected, the quarter was the sixth consecutive one the online retail giant has recorded a profit.

Amazon also stepped up investment on its digital content, its fast-growing cloud division Amazon Web Services, and the Echo speaker, which works with Alexa assistant.

The retailer has issued revenue guidance of between $42 billion and $45.5 billion for the fourth quarter, compared to analysts’ expectations of $44.6 billion.

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Verizon Buys Online Video Startup Vessel

verizon

Leading telecommunications company Verizon Communication has announced its acquisition of the subscription video startup Vessel and plans to shut its doors on users at the end of the month.

The acquisition of the online video service was announced by the telecom giant on Wednesday. The service would be shut down and the technology behind it deployed in the carrier’s Go90 platform.

However, the terms of the deal were not made public. The transaction should be finalized within the next 30 days, according to Recode.

Vessel was started in 2013 by former Hulu Chief Executive Officer Jason Kilar and former Hulu Chief Technology Officer Richard Tom. To date, it has raised almost $135 million from investors, including Greylock Partners, Institutional Venture Partners, Benchmark, and Bezos Expeditions, owned by Amazon CEO Jeff Bezos.

Tom and a number of Vessel employees will be joining the Go90 mobile video service team. The Vessel co-founder will serve as the CTO for digital entertainment efforts of Verizon.

“With Richard Tom leading technology and operations and Lonn Lee heading up product, we have the utmost confidence in our ability together to rapidly executive and enhance our products,” said Chip Canter, general manager of Verizon Entertainment.

Kilar will not be joining up with Verizon, at least not on the long-term.

With the acquisition, Verizon desires to use the technology and software powering the Vessel video service to speed up the growth of its Go90 platform. Canter told Recode in an interview that some social features of the online video service would be integrated into the existing content strategy of Verizon.

Vessel offered users access to content by top video creators, including YouTube stars, for a monthly payment of $2.99. Non-paying users were allowed access to ad-supported videos. The startup founders never revealed the number of subscribers on the service, but Kilar claimed it was 10 times more profitable to content creators than YouTube.

Verizon is believed to be interested in how the Vessel model can help its free Go90 video service transition to paid subscriptions.

The Vessel deal, which was first hinted at by Recode last month, is the latest in a string of acquisitions by Verizon, which aims at building a future-focused TV service for mobile users. The telecom giant acquired Intel’s over-the-top video business OnCue in a deal valued at roughly $200 million in 2014. The technology behind OnCue is the foundation of the Go90 service.

Earlier this year, the wireless carrier acquired the digital media player Complex, in partnership with Hearst. It also has a 24.5 percent stake in the media and entertainment company Awesomeness TV.

Verizon bought AOL in a $4.4 billion deal last year and has its sight set on combining it with the core business of Yahoo, which it is currently working to acquire.

In a blog post, Vessel founders said the service will be brought to an end on Oct. 31. Annual subscribers will be given a prorated refund, Tom said. All users are to enjoy the service for free this month.

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