Murdoch becomes a Son of the Net

Outlook

RUPERT MURDOCH has two great passions in life right now. One is his new thirty-one year old wife, Wendy Deng. The other is the Internet, where the entrepreneurs come even younger than his new companion. For much of the 1990s, Mr Murdoch remained deeply sceptical about the Net. He thought Internet asset valuations absurd and he said the whole e-commerce revolution would end up destroying more companies than it created. Instead, he stuck to his knitting - newspapers, Fox, and satellite TV.

But if he was slow to catch on to the significance of the Net, he's making up for it with a vengeance now. Colleagues say he's obsessed with the thing and certainly he's taken to the rhetoric as enthusiastically as a nerd to cyberspace. In London yesterday to launch his new joint venture with Masayoshi Son, he waxed lyrical about the net being "the most geographically unlimited medium the world has ever seen".

If this sounds a little starry-eyed, just try this for size, apparently delivered without a hint of irony; "As they say in Silicon valley", he observed, "to know the future is to invest in it". Other similar mumbo jumbo was on hand to confirm Mr Murdoch's wholehearted conversion to the transforming powers of the Internet.

Eventually, Mr Murdoch reckons, half of News Corp's value will be represented by e-commerce and Internet related activities, and he's pouring money into it like there's no tomorrow. Some $400m of News Corp's capital seems now to have been earmarked for Internet ventures, some of it in conjunction with Mr Son, some of it alone. On top of that, News Corp is investing heavily in Internet technology and distribution for its existing businesses.

Even by Mr Murdoch's standards this is hardly small change. He's not betting the shop, as he arguably did with Sky TV and is now doing all over again with Sky's advance into digital, but he's certainly putting his money were his mouth is.

Mr Murdoch is nothing if not a visionary and canny businessman, so is he right to figure he missed a trick, and now needs to invest heavily to catch up, or has he just been sweet talked into a honey trap by the ever persuasive chief executive of Japan's Softbank?

Mr Son makes an impressive ambassador for the Net. He spotted its commercial potential early, and with hugely profitable results has invested in more than 100 of Silicon Valley's fledgling Internet content companies. Only half jokingly does he claim to own a quarter of cyberspace; calculated by the number of hits on the portals he has invested in, he does. He is convinced the Net will revolutionise commerce, and he is particularly convinced of it when it comes to the specific industry of media.

Few would these days dispute this view, but whether Mr Murdoch's somewhat unfocused bet on the net will pay dividends is another thing. What's a media tycoon doing investing in an on-line mortgage broker, for heaven's sake? Mr Murdoch is late into the game compared to the likes of Mr Son, and is having to pay a consequent premium for entry, while the Net is quite unlike the monopoly businesses he's run in the past.

Mr Murdoch has proved the sceptics wrong so many times that it plainly doesn't pay to bet against him. But as he rushes into the future, young wife in hand, he'd be wise to remember the old sayings; there's no fool like an old fool - and a fool and his money are easily parted.

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Mobile phones

THE FUTURE is not just orange but a brilliant hue of crimson encrusted with gold, if you see life through the same rose-tinted spectacles as Hans Snook. He is the proselytising chief executive of Orange, a latter- day Henry Ford who believes the mobile telephone will do for the next century what the internal combustion engine has done for this one.

Here is the gospel according to Snook. In two years' time one in every two Britons will have their own mobile. By 2008, nine in every ten telephone calls (voice as well as data) will be by mobile. And by the way, did you know it is already cheaper to use a mobile telephone than a conventional BT fixed line?

Even five years ago, claims such as these would have been dismissed as the product of a deranged mind. But who is prepared to bet against Mr Snook now? Certainly not the parents who will spend this Christmas vainly resisting pleas for a pay-as-you-go from their teenage and even pre-pubescent offspring.

The figures support the Snooks of the world. The latest subscriber numbers from Orange, Cellnet and One2One easily outstrip even the most bullish forecasts of the analysts. Moreover Hans reckons he has cocked a snook at the opposition. Its subscriber growth is least reliant on the less profitable pay-as-you-go market, and it has got in faster than other operators with mobiles that connect to cyberspace while walking down the high street.

The explosive growth of the mobile market means that subscriber numbers are rising faster than call charges are falling, which is one reason Orange will make its first proper profit in the UK this year.

The regulators, meanwhile are flailing along behind. Oftel's investigation into claims that the two biggest operators, Vodafone and Cellnet, are unfairly subsidising their own service providers is a pinprick. In any case, its impact was dulled by a fresh rash of price cuts by Cellnet and the regulator's own admission that competition is now such that there will be few grounds for continued price controls in a year's time. Maybe the future really is orange

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Eco optimism

A YEAR is a long time in global economics. Go back twelve months, and the position appeared very bleak indeed. Analysts were predicting a hard landing for the UK economy, and the Bank of England was about to embark on a series of interest rate cuts in an attempt to head off what looked like certain recession.

The Chancellor's growth forecasts, on which his targets for the public finances were based, were looking ambitious to say the least. Europe was mired in recession and, just round the corner, the Russian crisis was about to cause mayhem in financial markets.

Fast forward to today and the transformation could scarcely be more remarkable. Manufacturing industry has emerged from 15 months of recession and retail sales are growing at their fastest rate for a year. In London and the South-east, a veritable boom seems to be in full swing.

Meanwhile, in the US the benign combination of strong growth, low inflation and low unemployment continues unabated and Alan Greenspan appears content to tweak monetary policy with a 0.25 per cent tightening. Japan is displaying unnerving signs of life, while investors are once again queuing to invest in the Asian emerging economies as if 1997's crisis had never happened.

It all looks too good to be true, and at the risk of sounding like a Cassandra, it almost certainly is. The next disaster waiting to happen in the world economy is almost certainly on Wall Street.

Alan Greenspan is trying his hardest to deflate the bubble gently, and so far he seems to be making a remarkably good job of it. But in the end he will fail. As surely as night follows day, there's going to be a downturn in the US. The only question concerns the extent of it.