Home Telecommunications Windstream Corporation Latest Company Comment of Windstream Corporation

Latest Company Comment of Windstream Corporation

41
0

German energy retail: price rises are hard to quantify

03 Jan 2008
While UK energy suppliers can justify price increases, Germany’s retail sector has a long way to go.
Recently, in the UK, wholesale energy prices have been steadily increasing and, as a result, some suppliers have increased the price of their wholesale market-tracker products. This has lead to speculation that customers on standard pricing plans may be about to face price increases as well.
In Germany, customers have been hit by price rises and are seeking justification from suppliers for the increases. However, due to Germany’s fragmented and restricted market, it is difficult for suppliers to justify the increased prices by pointing to increased wholesale costs.The lack of a liquid wholesale market has led suppliers to attempt to justify price increases by pointing to increased generation costs; however, due to the commercial sensitivity of these figures, suppliers cannot disclose them to the public.
In a liquid and tradable wholesale market such as the UK, increased generation costs will be passed through to increased wholesale prices, as suppliers will require a higher price to offset the increased costs of production. Despite the fact that the retail suppliers are also the dominant players in the wholesale market, they can use these transparent wholesale prices as their justification for making price increases.
The German government is currently putting pressure on suppliers to increase the transparency in retail pricing so that customers can decide whether the scale of a price rise is justified or not. However, this is simply attacking the symptom, not the cause of the problem. The government’s efforts to increase the visibility of retail pricing would be best spent trying to enhance the liquidity and tradability of Germany’s wholesale markets.
A functional wholesale market would also increase the likelihood of alternative suppliers entering the retail market, giving German customers greater competition and choice. UK customers are benefiting from greater choice, and many new entrants have blossomed in the retail market in 2007, largely due to the fact that these new suppliers can trust that the wholesale market will not suffer dramatic variations that would put the viability of their business at peril.
UK consumers are in a cost-reflective market, which can be volatile. However, justifiable action appeases the cynical; a policy that the German retail market would do well to follow.

Becton Dickinson: assay could improve MRSA treatment

03 Jan 2008
BD Diagnostics’ StaphSR assay has been given US marketing approval.
BD Diagnostics (a subsidiary of Becton, Dickinson and Company) has received clearance from the FDA to market its GeneOhm StaphSR assay. This is the first test which can rapidly identify Staphylococcus aureus and differentiate methicillin-resistant Staphylococcus aureus (MRSA) from patients’ blood cultures.
The FDA cleared the BD GeneOhm StaphSR assay based on the results of a clinical trial at five locations. The new assay identified 100% of the MRSA-positive specimens and more than 98% of the more common, less dangerous Staphylococcus specimens. The assay is easy to perform and provides results within two hours, requiring less technologist time than traditional microbiology tests, which can take up to two days to generate results.
Staphylococcus aureus strains account for the majority of hospital-acquired infections. While there are several antimicrobial agents available for their treatment, therapeutic options for methicillin-resistant strains are limited since these are commonly resistant to additional antimicrobial agents such as oxacillin, dicloxacillin, and cefazolin.
In addition, a lack of effective diagnostic tools enabling rapid and accurate detection of the underlying pathogen has made the timely administration of effective treatment more difficult. Consequently, physicians are increasingly prescribing broad spectrum antibiotics that target several different types of pathogens at once, which has contributed further to the emergence of resistance. Identifying the correct pathogen is not only critical for successful treatment, but also for prevention of resistance development.
Tests such as the StaphSR assay can help overcome this hurdle as they allow physicians to identify the underlying cause of infections quickly and implement therapy that is specific to the pathogen and therefore more effective. Earlier provision of critical microbiology information can also lead to decreased mortality, and will help hospitals cut costs associated with treatment and the length of stay. Finally, the accurate identification of pathogens can potentially reduce the use of broad spectrum antibiotics.

European fuel retailers: going unmanned

03 Jan 2008
Unipetrol’s fuel retailing arm Benzina is the latest retailer to invest in unmanned networks.
Benzina, the fuel retailing arm of Czech firm Unipetrol, is the latest example of a European fuel retailer expanding its unmanned network. The company has launched a new self-service refuelling system for truckers which will be operated by Kuwait Petroleum’s International Diesel Services (IDS). With its seven unmanned self-service sites, Benzina claims to be the first company in the Czech Republic to introduce the IDS refuelling system and plans to further expand the relationship with IDS at other sites across the country.

The launch of Benzina’s unmanned sites comes as growing numbers of fuel retailers expand their unmanned networks, especially in Eastern Europe. Although the penetration of unmanned service stations into the public refuelling network is limited in the Czech Republic, growth has been high in neighboring markets.
Estonia has seen particularly strong growth with the number of unmanned sites increasing from 62 in 2004 to 125 in 2007, accounting for 24% of all public filling stations. This is the highest proportion of any Eastern European market. There has also been strong growth of unmanned sites in Poland, where the number of sites increased from 45 in 2004 to 82 in 2007.
The main reason why unmanned service stations are popular with fuel retailers is that they do not require any cashiers, and as such as they are cheaper to run. This means that fuel can be sold at a lower price. Furthermore, as unmanned service stations require less investment, it is viable for fuel retailers to provide a refuelling network over a wide geographic coverage and serve customers in thinly populated remote areas.
The move to expand automated sites in Eastern Europe, in particular, is likely to be a shrewd move. As these markets mature over the next decade, margins will be squeezed, competition will become more fierce and as a result the sector will consolidate. In such an environment, fuel retailers with a large proportion of low-cost unmanned sites will be in a strong position to fend off the competition and actually gain from the consolidation process. Benzina could therefore be one company that benefits as the market matures over the next few years.

UK energy retail: are price comparison websites good for customers?

21 Dec 2007
Confused.com has become Energywatch’s 13th accredited energy price comparison website.
Many customers use price comparison websites, not only for electricity or gas, but also to compare financial products, travel, and other goods and services. These sites provide a great opportunity for customers to compare different propositions from different companies based on criteria provided by the customer.
However in many cases, customers fail to realize that these websites normally charge suppliers to be shown on their site, and as a result, customers are likely to be choosing from a segment of offers in the market – not all available offers.
The number of price comparison sites available and the lack of consistency between sites will most likely add to the confusion of customers. In addition, suppliers that are not clients of sites are less likely to be informing them of new prices when changes occur, and will usually leave it to the site administrators to update prices where incorrect information can mislead customers.
Indeed, the large increase in uptake of ‘online only’ tariff options by customers could be attributed to the increased use of price comparison sites. Ofgem figures show that between 2006 and 2007 there was a 100% plus increase in accounts that were signed up online. One advantage for suppliers is that often the price comparison sites will collect all the required information and then pass it through for the supplier to activate the switching process, saving call center and back office costs.
Recently, price comparison sites have attempted to differentiate themselves by introducing service and quality ratings on some sites, but these could be open to abuse. As these rankings are operated by the site administrators, their interests may be best served by promoting the suppliers that pay the highest fees. In addition, most service rankings could be disputed and suppliers could argue about their rankings.
Ultimately, energy suppliers would want a consistent and robust pricing system across all of these price comparison websites, to ensure customers are not needlessly confused. However, for the time being, web portals can negotiate varying commission structures that suppliers may accept just to be able to win potential business.

Chocolate: healthy bars reveal their dark side

21 Dec 2007
A report in the Lancet has cast doubt on health claims made for dark chocolate.
The medical journal The Lancet’s report into dark chocolate commented that consumers are being kept in the dark about the flavanol content of chocolate, with bars rarely containing the information on their labels. The high levels of fat, sugar and calories in chocolate also make them less healthy than consumers perceive, the journal noted.
Sales of dark chocolate have soared in recent years, partly in response to reports that it is good for you. Most recently, the journal Circulation showed that flavanol-rich chocolate caused blood vessels to open up improving heart function. Sales are predicted to continue to rise; in the UK, Datamonitor forecasts sales to climb 48% from 2006 to 2010, to reach a market value of $362.8 million in 2010.
Major chocolate manufacturers have responded to this growth by enhancing their dark chocolate portfolios. In the UK, Nestle has introduced, among others, Kit Kat Dark bar, while Cadbury has relaunched its Bournville dark chocolate range in new packaging. In addition, Mars has been promoting a dark chocolate bar in the US since 2005 that specifically makes healthy claims related to its flavanol content, recommending that consumers should eat two bars a day to gain the full benefits of its healthy ingredients.
One chocolate company that has an edge over the others in terms of its health claims is UK-based Prestat, which has recently launched Choxi+ chocolate bars. This product is said to contain two to three times more antioxidants than regular chocolate due to its careful cooking process – the ingredients are gently cooked over a low heat. However, even this bar has its unhealthy elements, as it makes no claims to contain less fat, sugar or calories than conventional bars.
While health has been one reason for dark chocolate’s rising prominence, the candy has also benefited from the premium trend, with consumers upgrading to dark chocolate in the belief that it is higher quality than milk chocolate and therefore better tasting. Even if reports into dark chocolate’s dubious health claims continue to emerge, the candy is likely to continue its high growth rate based on its premium reputation. Manufacturers could therefore expect to see rising demand for their dark chocolate brands for the foreseeable future.

Burger King: hoping for a royal welcome in China

20 Dec 2007
Burger King plans to enhance its presence in Asia
Burger King has told Reuters that it has implemented a strategy to enhance its international presence, so that in five years time half of its revenues will come from outside of the US. It currently only generates a third of its revenues from outside its home country, but plans to open 80% of new outlets in international markets over the next fiscal year.
Asia is a particular pull for the country, especially China, where fast food retailers have been capitalizing on the growth of the middle classes and rising disposable incomes in the country. Burger King rivals McDonalds and KFC have already begun exploiting this potential, dwarfing Burger King’s 10 outlets in China with their strong presence – McDonalds has over 800 outlets in the country, while KFC has over 1,500 branches.
Burger King has struggled to establish a presence in Asia in the past, pulling out of Japan in the mid-1990s due to tough competition in the region. However, it now plans to significantly expand its presence in Asia, re-entering Japan, and pushing for a stronger presence in China, whose growing economy and acceptance of western business is perceived to be a good investment opportunity for the company.
Another reason for boosting outlet numbers in Asia is the obesity crisis in the west. With obesity concerns being paramount in Europe and America, fast food firms have been accused of accentuating the problem. The crisis has not hit Asia with as much force, however, so the region could therefore offer the likes of Burger King an opportunity to offset falling business in countries where obesity worries have turned people off fast food.
While short of McDonalds and KFC levels, the 300 new outlets that Burger King is planning to open in China is a realistic expansion rate, which will provide it with good foundations to compete more effectively in the region.

Bristol-Myers Squibb: makes move to cut costs
19 Dec 2007
Bristol-Myers Squibb is selling its medical imaging unit as part of a major restructuring program.
Bristol-Myers Squibb is to sell its medical imaging unit, BMS MI, to leading private equity firm Avista Capital Partners. BMS will receive $525 million for the unit, which supplies medical imaging products for nuclear and ultrasound cardiovascular diagnostic imaging procedures. The deal is expected to close by the end of January 2008 subject to customary regulatory approvals, and will see BMS MI become an independent company with a new name.
Don Kiepert, founder and former chairman, CEO, and president of Point Therapeutics, will head the company. BMS MI will be New York-based Avista’s second investment in the healthcare industry in the space of a week, having announced the acquisition of Boston Scientific’s Fluid Management and Venous Access businesses on December 13, 2007 for $425 million.
The sale comes two weeks after BMS announced plans to cut 4,300 jobs and close more than half of its manufacturing plants in a move to save $1.5 billion in costs by 2010. With a global workforce of 43,000, the redundancies will reduce staff numbers by 10%.
The cost-cutting decision will enable BMS to concentrate resources on its R&D efforts, with particular focus on the continued development of specialist biotech products, such as the cancer drug ipilimumab; a monoclonal antibody (mAb) in Phase III clinical trials; and biologic Orencia (abatacept), launched for the treatment of rheumatoid arthritis in 2006. Moving away from a historically high focus on the cardiovascular market, BMS is increasing its presence in the oncology and immunology & inflammation markets, forecast to experience higher market growth industry-wide.
Given the impending patent expiries of several of BMS’s older products, including the best-selling antithrombotic Plavix (clopidogrel) in 2011, the company’s investment in its pipeline is essential to offset forecast losses towards the end of the decade. The sale of BMS MI marks the first major development in the company’s restructuring strategy.

UK energy retail: suppliers are subsidizing prepayment customers
19 Dec 2007
Although UK prepayment energy customers are paying more, they are being subsidized by suppliers.
Across the UK, prepayment energy customers normally face prices that are higher than standard credit domestic tariffs. This is because prepayment services are generally regarded by the market to be more costly to provide. Indeed, in its Domestic Market Report, UK energy regulator Ofgem has estimated that the extra cost associated with serving a prepayment customer is GBP65.
Ofgem has also calculated the differential between what energy suppliers are charging for prepayment and standard credit tariffs. The regulator’s findings show that only one supplier is offering a prepayment price that is higher than the estimated extra costs that suppliers bear in servicing these customers.Therefore, in the majority of cases, suppliers are accepting a lower margin for prepayment customers.

Although prepayment customers generally cost more to service, there is a direct benefit for suppliers in having customers on prepayment meters. By receiving the payment for the provision of energy in advance, the supplier avoids the risk posed by customers that make late payments or fail to pay.
However, this benefit is far outweighed by the extra costs that the supplier must shoulder. A high degree of the extra costs associated with providing prepayment infrastructure are incurred in the payment process.
Customers typically purchase the energy credits from local outlets such as corner shops or petrol stations that agree transaction fees for providing this service with suppliers. As transaction fees are normally set at a fixed amount per transaction, and as many prepayment customers tend to ‘top-up’ in small amounts, a large proportion of the payment from the customer is used to pay the transaction costs rather than paying for the energy that the customer will use.
The deployment of smart meters that is eventually expected to occur could play a large role in both providing a superior service for customers and giving suppliers cost reductions. Advanced metering can be used in prepay and standard credit modes and there is no need for a site visit, unlike the current metering method. In addition, customers can use internet payment technology to make payments, slashing transaction costs and making prepayment customers one of the biggest beneficiaries of smart metering.

Laura Ashley: recent upturn continues
18 Dec 2007
Laura Ashley’s total UK sales were up by 3.1% for the first 19 weeks of its second half.
Laura Ashley’s recent strong performance can be credited to its three-part recovery strategy. This consists of increasing its sales space through a store expansion program, enhancing operational efficiency and improving its offering. New space and an improved offer helped grow total sales, while profits, which were up by two percentage points, are much improved after a far-reaching efficiency drive in areas such as reducing its promotional activity and moving stores to more cost effective out-of-town locations.
The only dampener on these results is that the new space added has negatively impacted like-for-like sales, which have fallen by 10.8% over the period. However, aside from this cannibalization, tougher comparatives and a more challenging retail environment have also played a part in the fall in like-for-likes.
These worsening trading conditions also affected sales at Laura Ashley’s internet and mail order direct business. Internet sales suffered a slight drop off in growth, but still grew strongly, and mail order sales, which have steadily declined recently, continued to deteriorate. Overall, Laura Ashley stated that total direct sales fell marginally. We believe Laura Ashley should continue to focus on developing sales through its website, as it has performed well through this channel recently and the potential for future growth remains high.

Looking forward, Laura Ashley must manage its store portfolio carefully in order to maximize profitability. While new stores will boost top-line growth, opening stores close to existing outlets, as seen here, can lead to the cannibalization of sales, lower like-for-likes and often reduced profitability.
Managing the store estate may lead to the closure of some stores, which have been eclipsed by new stores opening nearby. While there is still potential for new space in the UK, another option for Laura Ashley is to look abroad. At present, it owns three stores in Paris, which could be used as a base from which to expand on the Continent in the future.

Source: Verdict Research

Somerfield: returning to the expansion trail

17 Dec 2007
Somerfield plans to open 250 new stores over the next three years, according to the Sunday Times.
Following Somerfield’s sale in January 2006 to a consortium comprising property tycoon Robert Tchenguiz, Apax Partners and Barclays Capital, the retailer has been through a period of transformation, closing 600 branches, selling discount chain Kwik Save, reducing its head office count from 1,800 to 800 and shutting six of its 10 distribution centers. The execution of its basic retail disciplines has also improved, with a reduction in product ranges creating a more coherent assortment, and enabling easier in-store navigation.

Importantly, these improvements are said to be bearing fruit, with like-for-like sales up in the mid-single digits for the most recent quarter and those at smaller stores improving in the high single digits. Key to this achievement has been its focus on local grocery markets trading from smaller store footprints, helping to distance the retailer from the bigger out-of-town sheds from the likes of Tesco and Asda.With the retailer now in a better position to expand its operations, chief executive Paul Mason has outlined an aggressive assault on the local grocery market, with plans for 250 stores in the next three years according to The Sunday Times. Focusing on local grocery markets not only helps Somerfield avoid direct competition from the Big Four, but enables it, due to its scale and branding, to gain competitive advantage over independents and smaller grocery chains.

However, Somerfield has a difficult road ahead. Even with the addition of 250 more stores, the retailer’s scale is small in comparison to the Big Four, particularly Tesco, which continues its relentless march into local markets. Sainsbury also continues to expand its successful ‘Local’ fascia, while the recent merger between United Co-operatives and The Co-operative Group has strengthened competition further.
Moreover, in order to successfully compete with tougher competition in local markets, Somerfield needs to improve its price position, which is out of kilter with its main rivals. And, despite improvements to store environments and product ranges, Somerfield’s offer lacks the potency of rivals, and while
aggressive physical expansion is a step in the right direction, and there are opportunities to grow its business, in a truly competitive market this will not be easy.
Source: Verdict Research