What's Important in the Financial World (12/20/2011) UK and EU, HTC and Apple

The UK says it will not contribute to a new IMF-based 150 billion euro package for use in bailing out regional economies. The UK government senses that as it pushes it own austerity to make up for a rapid rise in deficits, voters have lost their taste for helping a struggling Europe. UK GDP is already likely to contract next year. Joblessness continues to be high. The chance that the UK will effectively leave the EU increases by the day.

A Victory for Apple

Apple (NASDAQ: AAPL) has won another patent battle as its challenges the intellectual property of rivals. It has gotten the ITC to claim smartphone company HTC violates one of its patents. HTC says it can “work around” the problem. Perhaps that is true. However, HTC depends on the Google (NASDAQ: GOOG) Android operating system. The OS is under siege by both Apple and Microsoft (NASDAQ: MSFT). Android was supposed to be free to handset companies. Free has gotten expensive as Google rivals begin to collect royalties for Android use.

T-Mobile: What’s Next?

AT&T (NYSE: T) has dropped its $39 billion takeover of T-Mobile, the number four cellular provider in the U.S. The decision will cost the large U.S. telecom a $4 billion break-up fee its must pay T-Mobile parent Deutsche Telekom. The German firm undoubtedly will use the money to rebuild T-Mobile, which was in trouble before the AT&T offer. That trouble spread as customers came to believe that T-Mobile would disappear after the AT&T deal. Now Deutsche Telekom is left with a damaged asset. The only realistic way for it to gain ground on AT&T and Verizon Mobile is to buy Sprint Nextel (NYSE: S), the number three cellular company based on size. Sprint’s market cap is less than $7 billion. A merger of Sprint and T-Mobile is within the financial capability of DT.

Ignoring North Korea

As former North Korean leader Kim Jong-il lies in state next to the body of his father, the global capital markets have decided to ignore the threat of a less stability on the peninsula. Even stock markets in Asia rose. Kim Jong-un probably will be the next ruler of North Korea, the third generation of his family to do so. But the markets are preoccupied with the fight over the U.S. deficit and the trouble with eurozone sovereign debt. Until North Korea launches its first missile toward the South Korea or Japan, the succession there likely will be ignored.

Douglas A. McIntyre