City Republic: Oil prices may rise but deals are being discussed

LONDON - Despite concerns over the price of oil, there are plenty of big media and marketing deals on the table. And Apple's iPhone upgrade will excite the mobile market, writes Stephen Foster.

Why oil is anyone's guess
The piece of a barrel of oil soared on Friday as US payroll figures suggested the economy was heading for the buffers (if it's not there already). As the US still accounts for around a quarter of oil consumption, the prospect of an American recession would normally force the price down as demand slips in a recession.

Yet the price soared as the dollar took another pasting (oil is priced in dollars), causing panic around the world, not least among the finance ministers of the G8 group of rich countries.

The US Dow Jones index fell nearly 400 points, over 3%, one of the biggest falls on record.

The oil price fell back a little this morning and while Far Eastern markets slipped back sharply, they didn't replicate New York's disastrous Friday.

The dollar is one villain of the piece; it had been falling steadily anyway (as UK visitors to the States know as they fill their shopping bags) but the trend accelerated markedly when Federal Reserve chairman Ben Bernanke slashed interest rates to bail out the US banking sector and, to a degree, US mortgage holders.

So the world (including Americans) is paying a much higher price for oil, diesel and gasoline to help US bankers and householders.

The quickest way to arrest the rise in the oil price is for Bernanke to whack up interest rates in the US and boost the dollar.

But there's another villain too, for economists anyway, and that's our old friend George W Bush.

His interest in Iran is key.

Iran sits on the Gulf of Hormuz, the conduit for 20% of the world's oil, as well as being a big producer itself.

If Hormuz was closed the oil price would hit $200 a barrel, whatever happened to the dollar.

Which is one reason why people are prepared to buy oil stocks and futures at $130.

UBM and Informa discuss all-share merger
United Business Media has joined the all-share, nil-premium trend with an approach to rival information publisher Informa, suggesting a £3bn merger. Research firms TNS and GfK are already embarked on a similar exercise, although Sir Martin Sorrell's WPP may still have something more to say about that.

These are contrary markets; all-share deals are usually most popular when the shares of at least one of the companies in question are riding high. Media shares have been dropping like a stone all year.

Maybe UBM is gambling that the private equity boys, who could normally be guaranteed to interrupt a cosy all-share deal, won't be able to raise the money in tight credit markets.

Informa has surprised some by entering talks so quickly, suggesting that UBM's move is anything but a surprise.

As for TNS and GfK, Sorrell is said to be thinking about increasing his bid for TNS to somewhere north of £1bn.

But, as owner of one the world's biggest research outfits already in Kantar (which includes companies like Millward Brown and RSGB) Sorrell would face competition questions if he snapped up TNS.

Both these deals (UBM for Informa, TNS and GfK) depend on shareholders seeing the benefits of rationalisation in bombed-out media markets, hoping for a payday later when media shares recover and the market re-rates the new, merged companies.

Good old hard cash is still pretty attractive though.

Apple to unveil new iPhone wonders
At today's worldwide developers conference, Apple is expected to unveil details of its new generation iPhone 2.0, including goodies like "videochat" and GPS.

But the big question is price.

The iPhone may be a nifty device with a loyal band of users (many of whom will, presumably, trade in their old models for these new ones) but it's hardly taken the market by storm.

Pundits reckon it has about 5% of the "smart phone" market, equating to less than 1% of the overall phone market.

The reason is that it's expensive, even in the US.

If Apple's Steve Jobs really wants to take over the mobile world he's going to need to bring down the price and make it available to more networks, as well as add new features.

This is what Apple did eventually with Macintosh computers, although it took the company about 20 years to do so. Will the ebullient Jobs admit he got it (partly) wrong?

Probably not, but he'll grapple with these issues somehow.

And what's Apple going to do with all those last year's models?

Stephen Foster is a former news editor of Campaign, former editor of Marketing Week and Evening Standard ad columnist. He is a partner in Editorial Partnership and writes the blog and Politics of the Media for Brand Republic.