>> live from pier three in san francisco, welcome to "bloomberg west", where we cover innovation, technology, and the future of is this. i'm cory johnson.

about $2.1 billion in the bank, twitter heads to the bond market, hoping to raise as much as $1.5 billion in its first dead offering. borrowing money while the cost of capital remains cheap. does the emergence of apple pay mean the end of a physical wallet and plastic credit cards? we will look at how apple pay works, how secure it is, and whether it is truly a game changer. t-mobile doubling down on wi-fi, offering customers a personal self spot and even a new router after the apple wi-fi announcement yesterday. emily chang is at the t-mobile event right now and will have an

exclusive live interview with ceo john leger coming up. a new report says law enforcement provided the nfl video of the blockbuster video of ray rice punching out his girlfriend. we look at the technology that could prove what the nfl knew and when it knew it. to the lead -- would are tapping the debt market filing plans to sell $1.3 billion in convertible bonds as the bank decides to participate in the offering, it could spread to a $1.5 billion marketing -- $1.5 billion market. twitter shares up 5%, but gave up nearly all the gains after the news was announced after hours. this offering is really big. >> it is. it is almost as much as they raised in their ipo, which was about $1.9 billion. >> it changes the balance sheet for this company. it gives them enormous cash resources. a ton of cash, they will have a ton and a ton of cash, but on the other hand, it makes me wonder how good their business is growing. do they need a longer way to get

there profitability going? >> they're not expected to be profitable this year were soon in the future at all. they want to expand their business, they are expanding overseas, making big acquisitions and they have a data provider for more than $100 million. they want to have all the potential to expand their business and their stock has been on a tear recently since they announced earnings. maybe now is a good time to do it. >> the business is doing a little better than losses indicate, but there are still losses here. is there the notion that twitter that they recognize we can get this money right now, we should take it because interest rates won't always be so good? >> absolutely. twitter has seen other companies going to the debt market and get money while it is cheap. they think why not us also? it is interesting to think about how much of an influence their new ceo may have had in this decision -- they are not saying that he did, but he did join very recently. ask a very smart guy. he understands what the markets are capable of, but anthony noto and a lot of the other smart

guys remember what -- from her the.com bubble and how 2001 was a very different world where anyone could raise money but couldn't in 2001? it's a very different world. >> who knows if the market might sour on these growth position companies? it's heading the market wants to see growth and a fast expanding business and doesn't care so much about profitability or how fast revenue or the user base is going to expand. they are trying to build things up so you have to get it while the money is there. >> it's interesting for a tech company, let alone a young company to sell stock. >> you see a lot of companies not tapping the public market, not taking the ipo route. we've had a lot of late stage venture capital investment, so it seems like equity markets are not really where to be right now

since equities have gone up and up and who knows what will happen there. >> thank you. a great story and an interesting one. we hope to see more of these financial machinations. the j.d.s. uniphase, one of the most important companies at the heart of the internet is splitting into. the stock is on fire after the close of trading today, but what does it mean for the company that's a big that's of the back out of the internet? jack clark was on the story at the get go. let's back up for a minute because we don't always talk internet infrastructure, but this is a company that takes electronic signals we generate and blast them into optical so it can be moving at the speed of light on the internet. is that a fair way to look at it? >> that's correct.

one part of the business makes the connective tissue of the internet which will be spun off into its own segment. there is another that does network equipment testing, so that is a validation of this kind of stuff. >> it's interesting that these two businesses coexist because this network validation, this software defined network is as hot as anything in the networking world right now. is it about the growth rates and separating them out so investors can see the difference? >> i would say that is correct. on the one side, you have an established market with three main players. the other one is thinnest are. -- the other is finistar. if you separate these two companies, you can get some more movement and agility to react to the different kind of change in this market.

>> when we look at the commercial optical products growth, it is growing and growing at a faster pace. i wonder if the market will reward that. we know there are shareholders to say the should be separate businesses. what are those shareholders saying now that they are getting what they asked for? ask shareholders can be greedy. others are saying they want to push so the companies can be even more aggressive in how they choose a ring value out of this so there's some appetite for an acquisition. just trying to see if there's any value that it hasn't properly brought out in this current split off proposal. broadly, they are happy, they just want to get a bit more out of it. >> we did an interview with diane bryant which is coming up later, but during the commercial break, we were talking about jdf interface. who knew you were about to have this great story to talk about

jack clark? a few minutes from now, john leger ewings us will stop the running carrier they like to call themselves. they've been capitalizing on apple's wi-fi announcement. we will hear about what they are calling an carrier 7.0 coming up on "bloomberg west." ♪

>> i'm cory johnson and this is "bloomberg west." can apple pay change the way we pay forever? 220,000 retailers and some of the nation's biggest creek card companies are betting that it will. how does it work and is it a game changer? can apple succeed were companies like google have failed? emily chang sat down with their

senior analyst and visa upon vp of innovation earlier today. >> it has been a really good story for us. a lot of folks have tried to practice mobile payment space and i think apple got it right. they realize it's an ecosystem play where they have 800 million plus cards on file. in order to play in the payment space, you need to work with the banks and they are leveraging a lot of technology and using what they do really well which is devices and software and doing what we do well, which is security and easy payments and putting them together. >> we have to wait for the ios updates to see how this work, but how will it work as far as you know? >> what is great is you can expect it to work. that is one of the things apple does well. this is one of those instances where everybody wins. card companies get better fraud protection, consumers get a more secure system, retailers win by ease of transaction

acceleration. >> what makes the way apple is doing a better than the way google tried it? >> apple has taken what they've done well at the itunes ecosystem. they have 800 million cards on file. by reaching out to the banks, they are replacing that with a digital account number tied to the device so that it only works on that device. that is the security layer. the most important part is because they've linked to that works back to the banks, the banks understand what's happening so the authorization and the security and trust that needs to happen is preserved. ask if i make a purchase at target and target is one of their retailer partners, target will never have my credit card? >> they have a 16 digit number linked to your card but not number the bank gave you. if that number is ever used outside of that apple device, the banks and networks know to kill the transaction. >> what if i make a purchase within the app that's already on my phone? stripe is partnering with apple

on the back end. >> you heard him talk about things like opentable and uber. they will pull that 16 digit account number off that advice and there will be work to be done to code to the new one. >> does that mean they will have my credit card? >> they will pull the new 16 digit digital account number off of it. >> with you make of how this works and the fact apple decided not to do it himself to bring in various partners? >> they hold another itunes year. they've transformed and industry. it looks like they've got the critical mass with retailers on board, card companies on board, the banks on board. you are going to have everybody not onboard looking to get on board in short order because it excel rates to consumer experience and that's what

everyone will want to be a part of. >> breakdown who gets a cut of what. as i understand, apple is going to get a cut of bank transaction fees. will they get a cut of credit card fees? >> i can speak to the network he's where there is no contractual relationship with respect to commercial terms and revenue sharing. the banks have to sign a contract we are not privy to, but with respect to the card networks and economics inside the payment transaction, nothing has changed. >> can you tell us more about economics? >> i don't have anything else to add. >> why is it so opaque as to mark >> it is par for the course for apple to keep a lot of things close to the vest. >> do you imagine apple will be making money on this? >> they're certainly going to sell more devices. it is a great aim changer for the handsets and watches themselves. it's an elegant system. whatever they're cut his, they're going to benefit through increased hardware sales.

>> visa is trying to expand this a broad. what are the outlook and challenges there? >> the visa fees which is the digital account number is based on a global platform. anywhere visa is today, we can provide the service. what we announced with the visa token service is that capability. at this point, we follow apple around the globe and we are already ready to participate. >> will apple pay be more secure than other forms of ayman? i understand it's potentially more secure than a waiter taking your credit card and going to the back restaurant for but other payments that happen electronically? >> that's part of it. it is an electronic security system with unique id. it is more secure than the alternative. is it perfectly secure? i doubt it is perfectly secure

and we might have a learning curve along the way but it is elegant. we have always built the business on the notion that there's no such thing as perfect security for the they take what we do well and have extended to things like the device. now you have -- if it is compromised -- >> they've added layers will stop >> how far into the future do you see a time when we will not be using physical credit card and i will not be carrying around a wallet? does consumer behavior have to change? swiping a credit card may not be the safest way and not that difficult. >> the behavior issues have to change. the good news is apple is creating a reference platform

and a standard everyone can point to. it accelerates the movement toward digital over physical. >> how was that? >> it depends how everyone else follows, but it could be a decade and more. the internet of things is going around this. we've got connected cars, connected devices and wearables. it takes all of the things that cards do well and puts them in embedded devices. so you can start to see the way forward. >> still ahead, we head over to the t-mobile event in san francisco where john leger just announced a deal with go go. we will talk to him next. you can watch is streaming on your tablet, on your phone, and on bloomberg.com. ♪ >> welcome back.

on the heel of apple's announcements yesterday, t-mobile has been making news of its own with an announcement of a so-called un-carrier, with several updates designed to help as tumors use their phone when there is no t-mobile cell connection, or including on domestic flights. emily chang is that the t-mobile

event in downtown san francisco. what is going on? >> i am at the t-mobile store on market street with the man himself, the ceo of t-mobile, john leger. he just gave a rousing resignation. un-carrier 7.0 -- you had four of these so far this year. i can't keep track. how many are we going to have question mark >> as many as we have aim points in the industry that need to be solved. one of the things we talked about in the session here was a trivia test to ask people when do you think was the biggest growth month in the history of t-mobile. everyone have a lot of guesses and the answer was august. the momentum of the company is great and we unleashed wi-fi which means every single device we sell from now on will be fully wi-fi enabled out-of-the-box. every wi-fi place will be a t-mobile tower. then we have the personal self spot, which is our own capability in the home to give five bars of coverage wherever you want it and a relationship with go go that will give you texting and visual voicemail capabilities on planes. but you are giving everyone their own personal cell tower? >>you are probably one of those

wealthy people with a gigantic home and down three stories you have this office. you get five bars worth of coverage. >> is this an admission your network isn't that good and you need help? >> i love this. the first couple of questions i got generated by one of the three ceos of at&t -- >> they didn't talk to me. i came up with that on my own. >> they said what are we going to do when t-mobile announces this wi-fi stuff. say they had to. my first answer to that is who cares? who cares if i can give a customer a full five bars capability, who cares the reason i did it? 57% of wireless customers say they've got some dead spots in their home or have a drop call. not 57% of mine, 50% of all stop >> historically, that his wife t-mobile fell to number four. until you came along -- it's because of the coverage. i know you have been working on it but how much has improved? >> we were here, we have zero

bars of lte. we've got nationwide will keep -- yesterday was discussions about their cave billet these and it was clear they are moving to next generation wi-fi calling and the only ones that have that is t-mobile. 17 markets and wideband lte and moving. it's not so much where we were and where we are but where we are going. we are the nations fastest four g lte. everyone uses us but you and cory. >> i need a little convincing. apple announced your the first carrier they are working with on wi-fi calling and texting. just last year, t-mobile did not have the iphone. how did this deal come about? >> we are not a utility. we are a mobile internet company. we think about things differently.

our network is brand-new. we went from no lte to nationwide. we are the only ones who got it. we think differently, and we are about providing our customers what they want. they've got utility company assets and mindsets and try to depreciate technology before they move on. it's not about customers, it's about them and what they have -- trickery, old assets, i like it. i counted this conversation start? >> are not authorized to talk about it. apple -- not speaking about yesterday in particular, they are a game changer. only apple can change entire industries. what they talked about with mobile payment yesterday with the watch, it's taking things mainstream. i will tell you when apple mentioned us on the call, we were surprised. happy and i'm glad to play the tape back for anybody.

>> we will be back with you after this quick break. more with john leger when "bloomberg west" returns. ♪ >> welcome back to "bloomberg

west." i'm emily chang here with john leger, ceo of t-mobile. they have announced a personal cell phone hotspot and a partnership with go go. the new iphone coming out means a massive opportunity for carriers to gain or potentially lose customers. you have a rise in and print, their trading deals are out there. you say you will be demolished give everyone an extra $50. >> a new device is a switching opportunity. when a new iphone comes out, the biggest group that risk is the group with the biggest bass of iphones, which is at&t.

that is the biggest switching pool. we announced something this week. i'm trying to take the uncertainty out all stop so much of the industry is trickery. the way people do trading is trickery. it's all used cars deals. i used to go with my father and they would try to screw you with trade-in values. so we say we know trade-in values. we put out a guarantee you will get the best trade-in all stop if you don't and you see you didn't, we will match that was at $50 to it. >> you have really shaken up the industry and everyone gives you credit for that. >> even cory. >> prices are going down but this is coming at cost. i wonder how long can the carriers keep doing these kinds of things to each other? you're not really hurting the business or damaging the business. >> what things are we talking

about? we have the same pricing plan. we've been very consistent about it. we have enabled the capability customers have in wi-fi and utilization of technology in devices. we have unlimited talk and text. simply going to give something additionally to customers. >> can you sustain the sweet deal or is the hammer going to come down? >> the guidance we laid out on three to five year growth -- we are smack on. as i introduced here in august, we gained 2.7 5 million gross adds. that's not the quarter, that's the month of august. 10% greater than the second guest month in the history of t-mobile. this is clearly having a positive impact on the company. we can't talk about earnings, but i'm very comfortable where we are. but last time i spoke with you

you said if i want to bring long-term competition and leave this entire industry, capital is important. one could be a transaction. they exist internationally and domestically and i think it's clear there is interest in t-mobile. this is before soft i pulled out. this was before the iliad and was turned down. what options are there now? >> what options aren't there? first of all, we are at the height of our growth. we are doing extremely well. this rant is cool in this company is on fire. we got a great dan alone capability of multiple auctions coming up that will give us read the depth of the italy. we have a great standalone future, however, there are some he different ways to think about the future of the company. i don't need to list them for you. what would make sense?

we are playing from a position of strength. all the discussion about sprint were rumors. but we were sprint's answer to fixing them selves. we were going to be t-mobile, and we are. >> i think bloomberg has some pretty good sources that reported you would be in charge of this sprint-t-mobile tie up. how did you feel about it? >> i am very clear on my opinion of john leger and it's very high. i have a very high opinion of him. there's no company he shouldn't run. that's my own personal opinion. of course you wouldn't be in charge of that. >> what about iliad? they are talking to pe firms to up their bid. how would your strategy work with there's? they would seem to have an even more radical strategy than yours. >> i've heard the same rumors

about them having an interest. i take it in a very flattering way. they think the u.s. market is ready for maverick. that is who we are. if they make approaches to the company, we will listen and see what happens. >> what to you want other than to be in charge? what we did today -- think about the results of the company. the industry is ripe for tremendous amount of more change. i take great pleasure on not just the growth that changing the industry. >> are you going to wear the apple watch? >> it's getting a little crowded here, but i thought it was beautiful. you have to admit -- >> do you think it's a game

changer? >> wearables are a game changer. that device come i don't know. i saw what you saw yesterday. everybody left there saying i know i'm going to get one of those. >> thank you so much. ♪ >> i'm emily chang and this is

"bloomberg west." turning back to apple pay -- they have teamed up with tens of thousands of retailers in the united states, including whole foods and macy's to accept a mobile wallet. because of a partnership with the payment start strife, apple pay can help out developers to enable one touch payments. joining me is the ceo of stripe. you are on apple's official list of partners. >> we are very excited to be there. >> what is stripe's role in apple pay? >> with apple pay, you need to work with a payment platform.

something that ables you to darcy credit card. stripe is doing this with a ton of these successful apps being developed. we have worked together to figure out how to make it really easy for developers to take advantage of that. we will be working with these developers over the coming weeks, ensuring their apps are ready to take advantage of it. >> are you handling all of the transaction or part of the transaction? is this bypassing some of the deals with credit cards and banks? >> folks like instant car -- it's a long list and we will be handling all of their apple paid transactions. >> what do you think the chances are apple can replace the physical wallet?

>> in some ways, the stripe opportunity is obvious. it took so long for it to happen? i think it's because it requires assembling so many different components. we have the technology, the relationship with banks and financial partners. it's the same dynamic at lay in mobile payments. the pos and retail stuff, whatever it will be, the devices, authentication -- the app developers and everything else, even though there's a battlefield of corpses present with apple's antecedents, apple pay is a really good chance. it has checked all of the boxes

and has an excellent chance of success. >> are point-of-sale terminals holding out and -- i know leona credit card is not the best way to do it, but it is what we all know. >> there are two interesting trends. a lot of active sales are doing this -- this is quietly happening. >> that is a technology that makes apple pay possible. you can just wave your phone and pay. >> exactly. the other interesting trend that will have some bearing is a lot of these transactions you think of as being off-line artists are shifting into apps or off-line. you think about order ahead or lift, these are not supplanting e-commerce transactions. these are replacing instances like in a restaurant or in a taxi.

the combination of these are moving into apps and in the fact that plenty of the pos systems are already enabled. i think it's a fairly ready ecosystem. >> it seems like this is bad news for ebay which owns paypal. paypal owns braintree which is your competitor. ebay says they will support apple pay. how is it different what you have set up? >> apple is working with a small list of orders. the list is available on their website stop because we work with so many of that -- i don't know what ebay or raintree's plans might be, but there's an interesting strategic misalignment at a macro level between paypal and apple.

paypal off strategy is undeniably predicated on owning the consumer relationship. paypal is a wallet system designed in the 90's. the fundamental idea behind the product is you should not need a wallet. you should not need to go to a browser. you should be able to authenticate with your fingerprint and the transaction is done. i think it's going to be interesting to watch that play out. it's going to be interesting to watch them reconsider the value proposition for the end-users. >> could take raintree and stripe out of the equation in any way? >> the design of apple pay today is carefully crafted so it enables apple to provide the user experience they want or their users while still maintaining all of the other properties required any other parts of the ecosystem. these companies are selling in multiple countries, on different kinds of devices, in different

channels. these companies need to have a commerce infrastructure they build on top of. it would be an enormous undertaking for apple to build all of that themselves. it's a more obvious strategy to work with the most successful commerce. forms. it would be an entirely different is this model -- it would be akin to apple deciding we should build aws just because apps want to have a backend for the things that run the phone. >> visa earlier said apple is not getting any cuts or what they taken the transaction. is apple getting anything from what you get any transaction? >> we cannot comment on the economics, but there will be no charge for our developers for businesses going on strike. apple pay will be a free product.

>> and they will still have our credit cards, right? >> the way it works is interesting. neither the phone nor apple itself story the credit card number. it's a little arcane behind-the-scenes, but what happens is the credit card number is tokenized and a token is sent to the business. >> the token is a unique number. >> exactly, specific to that vice. it also requires a single use token obtained on a per transaction aces. but from the user, that doesn't change. you can store your payment details and request the ride is normal and the billing happens to your credit card as normal. all that is changing is is substantially more secure. >> you seem to be on a roll, how does it work for my strategy perspective?

there's a lot of different kinds of partnerships. >> it's all oriented around the same pieces. we have talked about building economic infrastructure for the internet. a major contributor to the limitations today or the fact that there are not more is that the infrastructure hasn't been there to enable them. obviously, if it was easy to buy something -- billions of dollars of this would be happening. it's an obvious business model. there are more internet users in china than the u.s. the fact they cannot buy from non-chinese sites is ludicrous. it's a collective failing on our part that we are not enabling these. our strategy is to look at all the places were transactions should be happening and figuring out how we can facilitate it. people love for training this in

a horse race and tell me. if you look, two thirds of consumer spending happens on the internet. so it's not how it is apportioned on the pie chart, the interesting question is how we go from 2% to 10% to 20%. >> thank you so much. an official partner with apple on apple pay. >> how can improving datacenter's change the way we use the internet? ♪ >> you are watching "bloomberg

west." i'm cory johnson, back with the story everyone is talking about -- ray rice suspended from the nfl after tmz released a video of him knocking out his then fiancee. the nfl maintained it never saw the video and till tmz founded. but now the associated press says the video was sent to the nfl by law enforcement all the way back in april. this raises some important questions -- how was this monitored? google can see this audio? can the surveillance business ever grow only if privacy laws are cast aside? a company called behavioral recognition systems lab. the ceo joins us and talks about how to analyze the 06 -- io

footage. how explosive is the growth in the volume of this kind of footage? >> if you take a look at what was going on 10 years ago in the area of video surveillance, when there was a lot of use of analog technology, more antiquated technology in terms of today's standards, the growth rate has been exponential. you have the use of ip camera technology all the way through the sophisticated applications we have here associated with applying artificial intelligence that makes sense of the data being collected. not only do you have a scale model taking place in terms of the explosion of use of surveillance cameras, but you have a corresponding technological advancement. >> so a casino presumably has the greatest security available.

is it reasonable to think no one else saw this except for the casino security or does this stuff not physically get passed around but in this new technological era get digitally passed around? >> there's no question there's the availability of the digital imagery to be passed around a certain context. often times, these systems are closed the stumps, especially as it relates to public environments, especially in a casino environment. even though the data is available, at the end of the analysis, it is still possessed by the operators of the system. in this case, the hotel and casino security operators. >> so they have the video, i saw the video. law enforcement saw the video and have the video. now the ap is reporting law enforcement passed it on to the nfl months ago and the nfl

denied that before. we don't know what they will say now but we wonder how does tmz get a hold of these kind of things? could this be a hacking incident? >> that's possible. i can only speculate because i don't know the specific facts. what i have seen over the course of the year that it's likely in the scenario -- though i don't have any specific knowledge -- is likely this information was passed on to law enforcement at some point. it was disseminated in some capacity within the casino environment. once you start multiplying the dissemination of information, you have the potential for leaks, whether they are authorized or otherwise. in this case, it's likely this was an unauthorized leak and it found its way into the hands of the news organization. >> and one that is more digital and easily copied. does the facial recognition

software you guys sell, is that common in the industry that would have let law enforcement say that is definitely ray rice who punched this woman in the elevator as admissible evidence? >> we are in the business of applying very sophisticated analysis of behavioral activity. what we are looking to do is apply our artificial intelligence applications to the behaviors. from my experience being in the in history and law enforcement for 20 years now, the ability to apply facial recognition to any type of practical application is still elusive alt. in this or take your case, software like ours would have identified unusual behavioral activity taking place in this particular instance. >> thank you for joining us. we will have more "bloomberg

west" tomorrow. ♪

>> johnson & johnson is the company with many products and brands. what is ahead for the next century? that strategy is not going away. the company has its eye on emerging markets. >> the growth we have seen in asia lately is impressive. >> we will go to every single plant and make sure we understand what we need to do to have appropriate standards. >> the company is taking a page from silicon valley. >> bright