Evening Fool

Friday, 11 December 1998

Market Close
FTSE 100  5541.70 -118.60 (-2.10%)
FTSE AS   2536.27  -47.31 (-1.83%)

It's Almost Here!

TMF Nigel looks at the euro

Over the next few days you will see many articles, in the press and on the TV, about the introduction of the euro on 1st January 1999. If you are anything like me, you have not thought too much about this. After all, we are sitting here on our little green island with a protected pound. Why should we care? Well, I am sure we should all be thinking about this. In today's Daily Fool, I do not intend to touch on the political side of the introduction of the euro (that is much too dangerous and complicated for a fool like me). However, I thought that I should at least educate myself about what is happening, and I hoped that you Fools out there might be interested, too.

On the 1st January 1999, the euro becomes legal currency within the "euro-zone," which is those 11 countries who have qualified for and elected to join the first wave of the economic and monetary union (EMU). The 11 countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain. Of the other European Union countries, the UK, Denmark and Sweden all qualified to join but declined to do so, and Greece failed to meet the qualifying criteria.

So what does this mean? Within the euro-zone from the 1st January 1999 until 31st December 2001, electronic and paper transactions such as bank cheques, travellers' cheques, credit cards, debit cards, inter-bank transfers, etc. can be legally conducted in euros. However, it is important to know that you will not be able to go into a shop and pay for something in euro notes and coins during the first three years. Notes and coins will be introduced on 1st January 2002, and by the end of June 2002, the individual national currencies will be withdrawn and will cease to be legal tender.

Until the end of June 2002, the euro and the 11 national currencies will all exist alongside each other and you will be able to chose which currency you wish to pay in. Remember, though, that before the start of 2002, only non-cash transactions can be conducted in euros. From July 1999 the mark, frank, punt and 8 other currencies will be consigned to history. In twenty years' time we will all be telling our incredulous grandchildren about how we used to go on holidays to "the continent" and had to change our money for theirs. They will be appalled at how those wise men called moneychangers used to take a big chunk out of our spending money. They simply won't believe us!

The critical time and date for the euro-zone countries is the close of business on the 31st December 1998. From this point on, the value of the euro will be fixed forever in relation to the other national currencies. Now one euro is approximately equal to DM1.96, FFr6.58 and £0.71. The BBC have an excellent currency converter at this external link. The fixing of the exchange rates is one of the main benefits of the euro. Within the euro-zone the need to convert currencies will be eliminated.

If you want to know more about the euro, you could do a search on the web. But be warned, there is a huge amount of information out there, so be prepared for information overload! A useful starting point is the BBC's excellent euro facts guide and euro links page.

Today the market fell following the news of a profits warning from Coca Cola in the US. Coke warned that due to continuing economic problems overseas, it expects fourth quarter earnings of $0.24 to $0.25 per share, compared with analysts' estimates of $0.30. This did not, however, stop them announcing a deal to buy the non US drinks businesses from tonight's first Conqueror.

Conquerors

Cadbury Schweppes (CBRY) announced that Coca Cola (NYSE: KO) was buying most of its soft drink brands outside of the US, including Schweppes, Canada Dry, Dr Pepper, Crush and other regional brands, for £1.12 billion. The deal covers more than 120 countries but excludes the US, where Cadbury makes two-thirds of its soft drink sales and has a 15% market share. It also leaves out France (so Coke can avoid upsetting regulators who earlier rejected its initial bid to buy Orangina on anti-competitive concerns) and South Africa. The businesses involved accounted for 9% of Cadbury's earnings last year.

Cadbury Schweppes is keeping the Dr Pepper brand in the States, where (along with other products) it has a 15% market share, long-term agreements with major bottlers and a firm belief in the scope for growth.

Cadbury Schweppes, who are the world's third largest soft drinks maker behind Coke and PepsiCo (NYSE: PEP), leaves markets where its business growth has been slow. It is likely to use the funds to buy back its own shares, expand its US soft drink presence and acquire confectionery and chocolate businesses worldwide. Cadbury is also in talks with potential buyers for its non-US bottling businesses, which could have a value of about £500 million.

Cadbury and Schweppes have been together for 29 years, and the deal may eventually result in a change of name for the company. Discussions are likely to take place with Coca-Cola soon. Cadbury Schweppes shares rose 54.5p to 989p.

Atlantic Telecom (ATN) remains on schedule to complete the four Scottish networks during 1999 and is confident that it will have an initial presence in all of these areas within the next three months. In the six months to Sept 30 1998, the cable and satellite network operator reported a pre tax loss of £6.884m, versus a loss of £4.012m for the same period last year, on turnover of £6.906m, compared to £5.39m last time. The loss per share was 11.47p, versus a loss of 7.93p a year ago. The shares were unchanged at 152.5p.

Vanquished

British Telecom (BT.A) fell 12p to 848p, increasing yesterday's losses. The UK telecommunications regulator wants to determine if BT's control over local access lines could hamper competition as consumers increasingly demand high speed Internet and data services. It is all you Fools logging on to the Motley Fool that has caused this! Thank you.

Cable & Wireless (CW.) fell 30p to 695p after US company EDS (NYSE: EDS) announced that it has named Cable & Wireless CEO Richard Brown as its new chairman and CEO with effect from 15th January next year. In his 29 months at Cable & Wireless, Brown brokered 21 deals, including the recent purchase of MCI WorldCom's (Nasdaq: WCOM) entire Internet backbone and client base, so he is some smart cookie!

And Finally...

Well, I suppose it had to come eventually. You can now do a degree in e-commerce! In the US, Carnegie Mellon University plans to start a Master of Science in Electronic Commerce (MSEC). The one year course will be run jointly by the university's graduate business school and its school of computer science.

Aimed at entrepreneurs, small business managers and corporate information technology professionals, the program will require that students have a computer science background plus several years of business experience.

There are plenty of reasons to focus on e-commerce. The industry is growing quickly, and job openings are numerous. It is estimated that in 1998, the value of e-commerce will be $26.5 billion, compared to just $290 million three years ago. Forecasts are that commerce on the Internet will grow another ten times by 2002.

What starts in America usually quickly makes its way over this side of the Atlantic. I wonder how long it will be before the big business schools in the UK also offer e-commerce degrees? Come on, Manchester Business School or the LSE, what are you doing about it?

Don't forget, the Motley Fool is interactive. That means that you can also participate. So why not join us on the message boards, or write a Bribble?

Nigel Roberts (TMF Nigel)

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