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Independent record companies are expecting a substantial new revenue stream after striking a global deal to sell music through MySpace websites.

The agreement will enable independent labels to sell tracks through the social networking website, which is used by 70 million people. MySpace, owned by News Corporation, the parent company of The Times, has helped artists such as Lily Allen to find fame by offloading their music free. The website has agreed to sell tracks in partnership with record companies.

Independent labels account for 30 per cent of global music sales, representing artists such as Arctic Monkeys and The White Stripes.

The MySpace deal is the first product of an agreement by the independent sector to create a global licensing agency that will represent their interests in digital media.

Record companies want to see a return on their videos that are viewed free at present through YouTube.

Robert Bob Nardelli, 58, is a tragic figure in the annals of US corporate history. Singled out as a young man as one of the most able of his generation, at 23 he started working at General Electric, where his quick mind and skills as a manager were recognised quickly.

After a sojourn at Case Corporation in 1988, Mr Nardelli returned to GE in 1991, rising to become chief executive and president of GE Power Systems. In six years sales rose from $770 million to $2.8 billion. Jack Welch, the renowned GE chief executive, picked Mr Nardelli as one of three likely successors. But he lost out to Jeff Immelt and left GE in 2001 for the top job at Home Depot.

During his five years at the top sales nearly doubled, profits more than doubled and earnings per share went up more than 140 per cent. In the end, however, his career was defined by a seeming disdain for shareholders and by greed. At the AGM last May, when investors demanded answers to questions about his $245 million-plus pay deal, he refused to respond, turned his back on them and left the stage.

Such arrogance is not appreciated in contemporary corporate America. But he leaves Home Depot with a $210 million retirement package.

Borrowers beware: Mortgage advice needs to improve

Just what is so difficult about giving customers decent advice on mortgages? The Financial Services Authority (FSA), the chief City regulator, this week warned that just a third of companies selling home loans could show they gave borrowers “suitable advice”.

This isn’t the first time the FSA has warned about the poor standards of advice in the mortgage industry. In December, it warned of widespread failings in the sale of interest-only mortgages.

The watchdog also has an ongoing investigation into the sale of payment protection insurance, often sold alongside mortgages, which is far too often over-priced and not suitable for customers.

What really gets my goat about these lenders is their stupidity. That they’re run by people short of a brain cell or two is the first explanation that comes to mind for their repeated failures to comply with basic consumer protection rules.

After all, the FSA began policing sales of mortgages two years ago, so it’s not as if lenders haven’t had time to get used to the new rules. And if you’re in a regulated business, you know that sooner or later the regulator is going to come round to check you’ve not been cheating.

Warning that lenders can’t show that they’ve given suitable advice to two-thirds of borrowers is not the same as saying those customers have been wrongly advised. But it does mean we do not know whether people have ended up with duff products.

One particularly worrying FSA finding is that customers are being sold mortgages by lenders that have made no attempt to check whether they will be able to repay what they owe.

The Bank of England’s surprise decision to raise interest rates on Thursday again highlighted the danger faced by people who have taken on excessive borrowing. Lenders are widely expected to pass the 0.25 base rate hike on to borrowers very quickly. And in the rising interest-rate environment of the past 12 months, there has simply been no excuse for lenders not making more stringent checks on borrowers’ ability to repay home loans.

For its part, the regulator says it now intends to take enforcement action against the firms at which it has found the worst failings. We don’t yet know what that action might be - it could be a quiet word in the ear of senior managers or full-blown fines, with public naming and shaming of the worst offenders.

Meanwhile, however, what about the borrowers who have potentially been the victims of poor advice. Surely their files now need investigating to establish whether they have ended up with the wrong sort of mortgage? Mortgage advisers then need to go back to basics. That lenders aren’t bright enough to follow the FSA’s rules is the most charitable reading of the regulator’s report. It could be, of course, that advisers are deliberately flouting the rules in order to boost sales. But whether your adviser is a con man or plain stupid, do you really want him sorting out your mortgage?

* A plea for readers’ help. Over the next week, Save & Spend plans to overhaul the tables of best-buy products we run in each issue to help readers find the top deals. We want the tables to be as useful as possible to readers, so I’d like to hear your suggestions for improvements.

We’ll be looking at both savings and lending products, so there’s scope to include any changes or new information that readers think might prove useful. E-mail me with your ideas at the address below or write to Save & Spend, The Independent, Independent House, 191 Marsh Wall, London, E14 9RS.

d.prosser@independent.co.uk

The U.S. wireless industry has had more than its share of ups and downs over the past decade, passing from boom to bust and into a period of steady growth in recent years. A wave of consolidation over the past couple of years has also dramatically changed the investment landscape; of the four largest carriers, only one, http://quicktake.morningstar.com/stocknet/MorningstarAnalysis.aspx?Country=USA&Symbol=S http://quote.morningstar.com/Switch.html?ticker=S , isn’t buried within a larger firm. The majority of the wireless market is now in the hands of three players, and we’ve been saying for some time that we think this should benefit the industry over time. Yet, some carriers have struggled while many have thrived. We think this divergent performance has created an interesting investment opportunity.

The State of the Wireless Industry
We estimate that Sprint Nextel, Verizon Wireless (the joint venture between http://quicktake.morningstar.com/stocknet/MorningstarAnalysis.aspx?Country=USA&Symbol=VZ http://quote.morningstar.com/Switch.html?ticker=VZ and http://quicktake.morningstar.com/stocknet/MorningstarAnalysis.aspx?Country=USA&Symbol=VOD http://quote.morningstar.com/Switch.html?ticker=VOD ), and Cingular/AT&T Wireless (now wholly owned by http://quicktake.morningstar.com/stocknet/MorningstarAnalysis.aspx?Country=USA&Symbol=T http://quote.morningstar.com/Switch.html?ticker=T ) collectively counted 75% of all U.S. wireless subscribers as their own at the end of 2006, up from 72% the year before. Though Sprint’s gain came largely as a result of forced acquisitions of affiliate carriers, each of the three added customers, claiming about 80% of all new wireless subscribers industrywide, absent acquisitions. http://quicktake.morningstar.com/stocknet/MorningstarAnalysis.aspx?Country=USA&Symbol=DT http://quote.morningstar.com/Switch.html?ticker=DT T-Mobile, the fourth-largest carrier, performed well in 2006, but its share of industrywide growth slipped during the year. The firm remains half the size of Sprint Nextel, the smallest of the big three.

Overall, the number of wireless customers grew by about 10% during 2006, putting penetration at about 76% of the population. While growth slowed for the first time since 2002, we think the wireless industry should be able to reach about 85% penetration over the next few years, the equivalent of about 40 million new customers. We continue to believe that scale brings the ability to efficiently attract new customers, and the 2006 performances from the big three, even with Sprint struggling, lead us to believe that these firms will continue to capture the majority of industry growth over the next few years.

Consolidation also seems to have benefited pricing. After falling steadily for several years, most recently as a result of the introduction of family plans, prices for voice services have stabilized. Data services still represent a fairly small percentage of industry revenues, but their growing popularity has recently created a modest boost to average revenue per customer. Again, the big three carriers have a sizable lead on smaller carriers in upgrading networks and deploying data services. In this pricing environment, profitability across the industry continues to improve.

Value Among the Big Three?
Of the big three, Verizon Wireless was the standout performer during 2006; in fact, we’ve struggled to find new and different ways to convey this solid performance in our quarterly earnings updates over the past couple of years. The firm added 7.7 million net new customers during the year, a record figure for the industry. With 59 million customers, the firm trails AT&T Wireless slightly, but the quality of Verizon Wireless’ base, in our view, is significantly stronger. About 93% of Verizon’s customers are on post-paid plans versus about 81% at AT&T, and a much greater percentage of new Verizon customers are taking post-paid services. These customers generate more revenue and are far more loyal on average. Strong customer loyalty, as much as getting new customers in the door, has fueled Verizon’s customer growth; churn, the percentage of customers who cancel service, is far below that of its peers. The quality of the firm’s customer base shows through in its financial performance: revenue grew by 18% and operating margins expanded to an exceptional 25%.

Unfortunately, we don’t believe that Verizon Wireless’ stellar performance translates into an investment opportunity. Shares of both Verizon and Vodafone have run up sharply over the past year. Also, an investment in either firm necessarily includes investment in other businesses we aren’t as thrilled with, including Verizon’s fixed-line phone business and Vodafone’s recent acquisition in India.

AT&T Wireless was the most improved firm of 2006, in our view, accelerating growth sharply while expanding margins. The firm is coming to the end of the integration of the “old” AT&T Wireless and Cingular, and it still has room for further margin improvements. AT&T Wireless is adding far more gross new subscribers than any other carrier and has made steady improvements in customer service to build loyalty, which should translate into solid growth in 2007. However, AT&T Wireless is buried in AT&T, a stock we think is currently overvalued.

That brings us to Sprint Nextel, the last remaining of the big three. Sprint’s problems during the second half of 2006 have stemmed from difficulty merging the old Sprint and Nextel businesses. The two firms operated on different network standards and targeted different customer segments. Sprint Nextel has tried to largely maintaining two distinct brands and service offerings. In addition to removing some of the benefits of merging, like cost savings, marketing has been confusing and customer service has slipped, especially on the Nextel side. While the number of customers the firm serves has continued to grow, the quality of the base has deteriorated, crimping growth.

We think that Sprint’s problems are short term in nature and that the strength of the firm’s position in the industry will shine through over time. The first point we’d make is that miscues like these haven’t proven fatal in the past. For example, both Cingular and the “old” AT&T Wireless hit very rough patches before their merger in 2004. The firms were able to build around a core group of customers, incrementally improving service to attract and retain more fickle subscribers. We expect Sprint Nextel to do the same, though the intricacies of merging networks and services may drag the process out. The firm has been adding network capacity and expanding data capabilities to better serve customers. New phones that can be used on both of the firm’s networks should begin the transition to a single network and set of service offerings. The firm bit the bullet last month, providing expectations of sharply lower profits for 2007 as it invests to put customer service issues behind it once and for all.

Once Sprint Nextel alleviates the problems that have dogged it recently, we think investors’ appreciation of this business will grow. The firm’s 50 million customers still include some of the most loyal, heaviest users around. It has a deep wireless spectrum position that has allowed it to roll out traditional wireless data services and also give it the opportunity to try out WiMax, a new standard that promises to rival the fixed-line services available to many consumers. Because it isn’t tied to a fixed-line phone company, the firm has been a natural partner for the cable industry, and cable companies are starting to add the firm’s services to their bundle offerings. We think the stock’s current valuation not only leaves a lot of room to run when financial performance begins to more closely match that of its two giant peers, but also provides a big margin of safety even if it falls short.

Property news from America has been unremittingly grim for months. The sub-prime lending crisis devastated the real-estate market, and the dollar is flat on its back.

But amid the wreckage, some British property investors are sensing opportunity. The combination of the property price dive and the weak dollar has given huge buying power to investors armed with sterling.

Reports from estate agents selling US property in the UK suggest that British buyers are already moving in. Adrian McDermott of Escapes2.comspecialises in the Orlando area of mid-Florida, and has seen a revival of interest after a long period of stagnation.

“We’ve been very quiet over the last 18 months but in the last few weeks there has been increasing interest from investors,” he says. “A lot of investors have their currency organised and are waiting for the new year to see if the market has hit rock bottom.”

The Orlando area is popular with British investors because Disney World and the other theme parks attract huge numbers of British tourists. This enables US landlords to market their properties over here as well as locally.

A huge surge of construction, however, had the effect of swamping the market, and prices have declined steeply. As a result, buyers can find bargains – especially on estates where the developer is keen to get rid of the last few units, the so-called “inventory stock”.

“In the Orlando area there is an oversupply, and people who bought off plan two years ago are now coming up for completion, so buyers can negotiate substantial discounts of up to 20 per cent off the list price,” McDermott says. “We have had clients arriving on the site in person and driving a hard bargain. A typical four-bedroom holiday home with swimming pool in Orlando costs around $300,000, which is now less than 150,000.”

Investors are also looking at bargains from victims of the US property crisis who are facing repossession. In a process called “short sales”, the investor buys the property at a discount from the owner with the agreement of the mortgage lender. The investor gets a bargain, the owner escapes debt-free, and the bank does not have to go to the expense of legal proceedings. Although this is perilously close to profiting from someone’s misfortune, short sales can often be a relatively painless way out for families in distress.

The upmarket estate agents Savills has also seen a new interest in top-end US real estate. “We had stopped selling in the US completely but have just started again,” says Charles Weston-Baker, who runs Savills’ international arm.

Detailed research is needed to identify the areas that may be at the bottom of the property cycle. “It varies so much from place to place. In South Florida [the Miami area] there is massive oversupply and it is likely prices will reduce further, but in other areas there is limited supply and good demand,” Weston-Baker says.

Savills is also selling apartments in the Spire, a dramatic new skyscraper in Chicago. Designed by the trendy Spanish architect and engineer Santiago Calatrava, the unicorn-spike tower will be the tallest all-residential building in the world when it is completed in 2011.

The Spire, though, will certainly not be cheap: prices range from $750,000 for a studio flat to $40m for the penthouse right at the pinnacle, 2,000ft above the ground.

The boutique developer Bonnie Copp has a unique perspective on the US and UK markets, as she operates both in London and New York. “Anyone coming over to the US with sterling at the moment finds that everything is incredibly cheap,” she says. “It is like a third-world country. There is a huge influx of global buyers due to the weak dollar.”

The sub-prime scandal directly impacts only the bottom end of the market. At the upper end, prices are affected only indirectly by the limited availability of mortgages, so cash buyers have a very considerable advantage in places such as Manhattan.

“The US market is still strong at the top end in good locations. New York is incredibly strong,” Copp says.

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