Jeremy Warner's Outlook: There seem to be signs of life at ITV, and that's before Michael Grade even arrives

UK's disappearing corporate landscape; Bidding war hots up for Hutchison; Not yet time for contrarian thinking

Bong. With the speed of Big Ben chiming for News at Ten (or should that be 10.30?), ITV has finally got round to announcing plans for a broadband portal, on which it will be possible to access all ITV programming online. It's even recruited an online high-flyer, Annelies van den Belt from Telegraph Media Group, to manage the enterprise. Is this an early sign of the new broom, Michael Grade, making his presence felt?

Although he's not yet got his feet under the table, he's already suspended the company's share buy-back plans and pledged to invest the money in programming. And it was possibly his appointment that encouraged Ms van den Belt to take the plunge. Yet this is terribly late in the day to be chasing ITV's viewers into cyberspace. All over the shop, Mr Grade has a huge challenge in catching up with the new media front runners.

UK's disappearing corporate landscape

As part of its defence against an unwanted takeover bid from Nasdaq, the London Stock Exchange has been trumpeting the record £28bn it raised in new company listings last year. London's success in becoming the place of choice for company listings is obviously a cause for celebration, yet it disguises some disturbing trends.

While the number and size of overseas companies listing in London is strongly on the increase, the home-grown, corporate-equity base seems to be shrinking with a speed as alarming as that of the polar icecaps. The amount raised by British companies is significantly outstripped by the delisting of equity involved in the growing number of public-to-private transactions. Taking into account share buy-backs, the total size of the listed equity base is getting smaller, even adding in the growth in foreign listings.

Two phenomena are at work here. There is no need, perhaps, to find fault with the first of these. London's success as a financial centre has made it probably the world's leading international source of capital and therefore a magnet for corporations looking for investment. This has prompted growing numbers of overseas concerns to seek listings here.

The second is the continuation of extraordinarily benign credit conditions. The easy availability of cheap money means it makes sense to replace relatively expensive equity with debt. The cost of the debt is far outweighed by the likely return on the equity, driving a flood of private-equity takeovers and share buy-backs.

One reason for thinking this second trend a matter of concern is that gearing companies up with too much debt will plainly have adverse consequences for balance-sheet strength and business investment when credit conditions become less friendly. None the less, the market will do what the market does, and, until demonstrably proved otherwise, we have to assume "de-equitisation" is, in the round, a beneficial force which drives greater business and capital efficiency.

Yet the bigger concern lies rather in the ever-scarcer availability of reasonably well-known and well-researched British companies in which to invest. The more companies that disappear into the hands of overseas and private-equity owners, the fewer there are for ordinary investors to put their money into.

Private equity and hedge funds have been a growing alternative asset class for life assurers and larger, defined-benefit pension funds. Yet both of these institutions are a dying savings mechanism. In their place are individualised savings accounts linked in the main to the performance of listed securities. Both private equity and hedge funds are largely closed to all but the very wealthiest of retail investors. Where retail access is readily available, it tends to be poorly performing.

The upshot is that most ordinary savers are obliged to invest in listed equities if they are to pretend to a decent rate of return. If the companies we know and understand are being progressively replaced by those based in faraway places about which our intelligence and knowledge is patchy, then that seems to me to be just a tiny bit worrying.

Many of these new arrivals are undoubtedly a great deal more risky than the companies which are being delisted. Centuries-old standards of business probity and oversight are being replaced by an anything-goes attitude to listings under which, provided the risk factors are adequately spelt out in the prospectus, so that investors understand the dangers, it doesn't matter what the origins, substance and reliability of these companies might be.

Yet it is in such vehicles that our pension pots are being progressively invested. These changes reflect global trends in financial markets and the world economy. We are only at the beginning of the process. A less predictable future beckons.

Bidding war hots up for Hutchison

Li Ka-Shing, chairman of Hutchison Whampoa, has been much mocked for the disaster of his 3G mobile-phone enterprise in Europe. Hutchison's success with Orange must have gone to his head, it has been unkindly said. In attempting to repeat the exercise, he's squandered countless billions.

Pride prevented him from knowing when it was time to throw in the towel, so instead he's been chucking good money after bad.

Yet it seems that the old fox hasn't entirely lost the Midas touch. In India, he's managed to spark a bidding war for a majority interest in Hutchison Essar, with at least four players, possibly more, each vying for the country's fourth largest mobile phone company. According to reports, the bidding has already reached multiples of earnings not seen since the dying days of the dotcom boom. In some respects, there is good reason for this enthusiasm.

Mobile phone penetration in India is just 15 per cent of a population of more than a billion. There's mouth-watering potential for growth. On the other hand, much of the population still subsists below the poverty line. For the majority, a mobile phone is still an inaccessible luxury, even on the tiny charges and marginal handset prices Indian operators manage to achieve. Yes, there's potential for growth, but is it likely to be as big or as profitable as the markets anticipate?

Whatever the answer, Vodafone, one of the bidders, is going to need Houdini-like powers of escapology to stay in the bidding. The company's headroom is tightly constrained by self-imposed valuation criteria for acquisitions. Vodafone's chief executive, Arun Sarin, will have to make some heroic assumptions on growth potential to break free of them.

Li Ka-Shing may have blotted his copybook with 3, but he made a fortune out of Orange. The price he extracted from France Telecom was so big that it very nearly sunk the company. Mr Li may be about to repeat the trick with Hutchison Essar.

Not yet time for contrarian thinking

With the last bears finally vanquished, I'm beginning to get a little anxious about my previously bullish stance on UK equities. The markets got off to a roaring start to the new year yesterday. It was hard to find a bearish voice among the cacophony of new year forecasts. The mood seems to have become positively Panglossian, which is always dangerous.

As this column has repeatedly argued, there is good reason for remaining fundamentally bullish, both about the world economy and equity markets. In recent months, this has very much become the prevailing view. The contrarian in all of us advises that we should watch out for the consensus and do the opposite.

Yet like a lot of stock market folklore, the contrarian view is most of the time completely misplaced. Only occasionally does it pay to swim against the current. For the time being, we must let it carry us forward, like an incoming tide. Be careful not to get beached though.

j.warner@independent.co.uk

Sport
Luis Suarez and Lionel Messi during Barcelona training in August
footballPete Jenson co-ghost wrote Suarez’s autobiography and reveals how desperate he's been to return
News
newsMcKamey Manor says 'there is no escape until the tour is completed'
Voices
Hunted: A stag lies dead on Jura, where David Cameron holidays and has himself stalked deer
voicesThe Scotland I know is becoming a playground for the rich
News
people
PROMOTED VIDEO
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
newsSam Smith’s Mobo triumph is just the latest example of a trend
News
Laurence Easeman and Russell Brand
people
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
Fans of Dulwich Hamlet FC at their ground Champion Hill
footballFans are rejecting the £2,000 season tickets, officious stewarding, and airline-stadium sponsorship
News
Shami Chakrabarti
people
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
filmBenedict Cumberbatch reignites Star Wars 7 rumours
Sport
football
News
news
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker