>> i'm emily chang in san francisco and this is "bloomberg technology. u.s. lawmakers blast t-mobile's proposed $26.5 billion purchase of sprint. both companies testify before the new democratic white house. the saudi wealth fund is putting a stake in the ground in silicon valley, opening a san francisco office. will the tech industry welcome the kingdom? the-mobile slams hauwei,

japanese ceo tells me he will it as he builds a new mobile network and in the hot seat in washington as lawmakers grill them over their proposed merger. t-mobile ceo john ledger and sprint executive chair appear before the house communications subcommittee, defending the megadeal against claims it is a threat to competition. >> our opponents are wrong when they claimed that the merger will lead to higher prices. in fact, the opposite is true. . consumers will win with lower prices and better services how? our costs will drop sharply and network capacity will expand tremendously. senatorsne democratic called for the deal to be

stopped in a letter tuesday, saying it would hurt consumers. joining us from washington to discuss, we have the georgetown law distinguished fellow and the shields, who covers ftc. what exactly was the message today? >>'s message was pretty simple and we have been hearing it for a while, that the merger is good for competition because it will wrap in 5g and such great advancements that it will make the company a stronger competitor to at&t and verizon. it seemed like not everybody was buying it. he still gets a lot of questions from democrats worried about coverage in rural areas, worried about possible price hikes hiding somewhere within the pledges not to do that. emily: talk to us a little bit more about what lawmakers' biggest concerns are. >> sure. first of all, i think it is important that the concerns at this hearing today were not just from democrats, they were bipartisan. as todd said, the concern that when you combine four mobile wireless carriers into three, prices will go up, because you are eliminating a competitor. particularly, there was concern

about low income consumers, because one of the things that have gotten lost in these merger discussions is the fact that if you combine t-mobile and sprint, you are combining three of the biggest prepaid carriers, so that is virgin mobile, boost mobile, and metro pcs. this will have a disproportionately harsh impact on low income consumers an what is fascinatingd is that in filing to the federal communications commission, sprint and t-mobile's economists have said, we know that this is going to raise prices on low income consumers, but they use their cell phones a lot, so they will just bear the cost, which i think is a remarkable admission. emily: let's take a listen to some of the pushback. here is a clip from congressman mike doyle. >> that would take the prepaid market from where it is right now, at 24 67, which is just $44.81, athreshold to

level that raises lots of red flags. these kinds of numbers have historically resulted in higher prices for consumers, less competition, and less innovation. emily: now, that said, didn't john ledger promise that prices would not go up? todd: the said at a couple different ways, but i talked to doyle after the hearing and he is not convinced and he wants the fcc and the justice department to take a quick look -- or take a deep look at it, excuse me. there are a lot of different ways to make pledges about prices and a lot of ways to adjust the prices after and say you got a lower price considering what you've got. it is just not trusted right now by some in washington. emily: is this a promise that if this happens that ledger would actually be held to? gigi: this is interesting. t-mobile has made a three-year pricing commitment promising not to change the prices of rate plans.

there are so many loopholes and that you could drive a truck through it. they could change the data caps, they could increase network quality and increase charges, they could increase third-party charges. so, that "pricing commitment" is no commitment at all. there is a more important point. particularly in this administration, policymakers have already said -- the assistant attorney general has already said, we do not want to be overseeing merger commitments. we do not want to be acting as a regulator and looking at whether companies are abiding by their behavioral commitments. so, there was no appetite for behavioral merger conditions and, frankly, they don't work. they did not work in the comcast-nbc merger, in fact bloomberg was one of the unfortunate non-beneficiaries of that. they don't work in other mergers. particularly in this administration, nobody wants to be in the business, neither the

sec nor the justice department, of essentially encasing and price regulation. emily: john legere had quite a few pronouncements at this hearing. take a look at this one about huawei. >> let me be clear, there is no huawei or zte equipment internetworked today and there never will be, not today, not tomorrow, not ever. hasy: of course, t-mobile been involved in a case involving huawei and allegations that they stole intellectual property from t-mobile, having to do with robotic technology. what do you make of that pronouncement? one that hek it is could easily make. he even said that we have a history with that company, indicating a bit of distaste with huawei given their legal entanglements. there was a recent indictment of huawei by u.s. officials saying they stole t-mobile trade secrets.

there is the pledge for t-mobile itself in the united states. opponents look to the parent corporations, softbank and deutsche telekom, and say there there, and maybe that is not far enough, say critics. emily: can sprint survive without this deal? gigi: absolutely. the notion that sprint is a failing firm is nonsense. they are not even an ailing firm. they just put out their third-quarter financials just two weeks ago and they are gaining subscribers in the lucrative postpaid market. their revenues are increasing across the board in prepaid and postpaid. they have invested over $1.4 billion in their new network. there is nothing about their financials, frankly, for the last several quarters that make you make anybody think that sprint is anywhere near failing. in fact, they are really on the uprise. there is no need to have this merger.

the promises that these companies are making, they are not merger specific, they have not proven that they would actually come to be, in the harms to consumers far outweigh the alleged benefits of this deal. emily: all right, strong opinion there. gigi stone always good to have you with us. todd shields. later in this hour, we will have new comments from the ceo from rocket 10, one of the biggest conglomerates in japan, who says he is not using huawei in his new mobile network. i just set down with him and we will bring you that interview later in the show. meantime, a story we are watching, google will invest $13 billion in data centers and off his across the -- offices across the united states. the company is planning major expansion in 14 states, including nebraska, nevada, ohio, and texas. they say the investment will create thousands of new construction jobs outside the traditional base in california.

up, thanks to new software and services, cisco's second quarter was a standout. we will break down all the numbers next. this is bloomberg. ♪

emily: cisco out with an upbeat fiscal report. confidence corporations are continuing to spend on their computer networks. for all the details, i want to bring in our bloomberg intelligence correspondent who follows the company for us. this is a company that is often considered a bell -- bellwether for the global economy. what signals are receiving? >> sure. in terms of the positive signals, it is not only the

growth they delivered in this second-quarter results, but also the forecast for the third quarter results. if you think about it come off the marquee global economy, it is very strong. emily: give us the highlights. >> on the highlights, think about the cisco story, the transition that has been going for more hardware to software and then what is driving the enthusiasm in the name or the story today is the application growth of 24% on a euro in your basis, security software growth of 18% on a year on year basis. those are the two metrics that investors have been focused on in terms of the long-term direction. the guidance reinforces that that direction is going to continue at least in the near term. how does this jive with some of thee other indicators we are seeing, the massive slowdown in china for example?

general political and economic uncertainty? >> that is a fantastic question. if we look at the tech earnings season this past quarter, intel was talking about china being slow in terms of the data center cloud server business. we are seeing data center investments slowing down because we see a lot of club companies consuming some of the excess inventories. there are a couple of things about cisco that are nuanced. number one, they have very real china exposure. i think it is 5% of revenues are exposed to china. number two, if you think about where the big driver has been, it has been more on the campus and the enterprise switching business. that is less exposed to some of the data center clout investments. that is one of the reasons why cisco has been able to exceed

expectations into results. been: the cisco ceo has ringing the alarm bell along with the apple ceo tim cook. is this part of a strategy? >> i think it is part of a broader strategy of the tech bellwethers. i think companies like apple and cisco are trying to be the parents in the room and try to differentiate themselves from the other hyper-scaled guys who do use data as part of a business model. cisco, given that they are the heart of the network, i do they want to ease investor expectations and also user expectations in terms of data privacy. emily: certainly seems as if a line has been drawn in the sand in big tech. thank you for weighing in. this is a juicy one. a former top lawyer at apple was

responsible for making sure employees did not violate insider trading laws, but he was the one allegedly buying and selling shares illegally, at least according to u.s. authorities. ouring us now is correspondent covering the story for us. what happened? >> this is a bombshell. last year, the sec notified one of their most senior executives in the entire company, senior lawyers, had conducted some insider trading based on having create access to press releases and earnings results related to quarterly earnings reports. he initiated some insider trading in 2011 an it picked up again ind 2015 and 2016 and apple seems to have confirmed that this indeed happened because they said they launched their own investigation last year and then ended up terminating or firing the attorney. clearly a bombshell and a black

eye for apple, which had a clean record in this regard since steve jobs was accused of options backdating back around 2004, 2005. emily: apple in a statement told us after been contacted by authorities last summer, we conducted a thorough investigation with the help of outside legal experts, which resulted in termination. it sounds like they took swift action. mark: right, they clearly took this seriously and no matter how high

pass. we saw this back with the options backdating scandal. apple's former cfo, this was two or three ago, fred anderson, he had to leave the board of directors at the conclusion of that investigation. gene levoff, extraordinary italy well regarded -- extraordinarily well-regarded apple executive, he is listed as the director o many of the corporationfs and entities that apple has acquired over the last couple of decades, very high level -- he was terminated at the end of this investigation. emily: this led to $227,000 in additional profit, but allowed in losses.d $377,000 applesd legal in department with him leaving? or is there a pretty strong bench? mark: apple actually revamped part of its legal department at the end of 2017 when it's former general counsel retired from working at a technology company. kate adams came from honeywell as the new general counsel. she shuffled some of the top people there there is a deep bench in the legal department. . something really important to note\, he avoid losses of about $350,000, he profited around $245,000 or so, but the apple employee salary for someone at that level is probably close to

$1 million base salary and a few million,million or $10 in additional stock options on an annual basis. forfeiting all of that and a career over $300,000 or so seems like a poor choice on his part. good to see apple taking swift action. emily: all right. mark, think is a much for filling us in on that one. coming up, fourth-quarter numbers out. the ceo and cofounder tells us what to expect for the rest of 2019. they have a very unique view of what is going on across the internet. bloomberg tech live streaming on twitter. check us out on technology. follow us at tictoc on twitter. this is bloomberg. ♪

mars: nasa's opportunity rover was supposed to last three months. after 15 years, its mission was finally declared in cleat. flight controllers tried to make contact with the vehicle numerous times and sent one final wake-up song, billie holiday's "i'll be seeing you." there was no response from space. had a good run though. akamai reported stronger-than-expected quarter results beating estimates for earnings and revenue. this as the cloud security business grew 39% over the quarter. akamai also announced a joint venture with the largest bank in japan to offer new blockchain based online payment network. joining us to discuss is the akamai ceo and cofounder, tom leighton. tell us. tom: it is pretty exciting. the goal is to replace the legacy transactions system for bankingwith a blockchain based a blockchain based

system that will be efficient and secure. emily: you have a very unique view of what is happening across the web. we were speaking about cisco's positive earning results amidst all of these economic headwinds, the economic slowdown in china, general political and economic uncertainty. are you seeing any of that reflected across spending? tom: in our business, we are doing very well and looking forward to a strong year ahead. somethingity is not that is negatively impacted by those trends. every enterprise needs security solutions more than ever. reason why our security business is growing so rapidly. to 2019, we are seeing a strong year for growth. with our earnings per share, we forecast in the midpoint of the range at 14% year-over-year in 2019. emily: how big is the addressable market for your security products? tom: i think it is very large.

today, we focus on the denial of service prevention and stopping attacks for consumer facing websites. markets a much bigger protecting enterprises with their employees and their data from data breaches. we have developed a new zero trust architecture that we are bringing to market and we think the potential market is even bigger than what we are already doing with the service prevention and application layer of rejection. emily: does akamai have any business in china and, if so, will it be impacted by the trade issues? tom: we do have business in china, both from non-chinese companies delivering content into china, and also for chinese companies that want to deliver content outside of china and that business has been growing rapidly. there has not been a major impact with some of the challenges in the region and we

have excellent relationships with major chinese companies and carriers. i think we are in a good position. emily: there seems to be growing tension between consumers who want to trust their tech companies and the products that they use and the business models of these tech companies trying to squeeze as much value out of the data as possible. do you think there is a fundamental disconnect emerging? tom: this is certainly a challenging area. it is an area we are working on from the perspective of keeping user data private. and making sure that it is only used in the ways that users wanted to be used and respecting the laws that are being put into effect in several countries around the world. the general data privacy regulations, we actually help our customers respect those regulations by making sure the data stays where it is supposed

to stay. do you think it is working? tom: i think it is very early days and it is a complicated set of regulations. i think it reflects the inherent tension between having your data used in good ways, but not in ways that you can't control that aren't so good. it is hard to legislate that. emily: all right. .om leighton, ceo of akamai thank you for stopping by. tom: thank you. emily: tesla rushes to get model 3 going before the trade war expires. and coming up later in the show, tech giants have done business with saudi arabia in the past. now, the kingdom wants to rent space in silicon valley. but times may have changed. this is bloomberg. ♪ . ♪

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emily: this is "bloomberg technology." we join bloomberg daybreak australia. let's look at the global tech stories of the day. haidi: apple is planning to unveil new video subscription offerings next month. it's the first major new digital services from the company since 2015. it's similar to amazon's prime video. it will include tv shows and movies, all funded by apple. the pay service will launch by summer.

new questions surrounding uber's license to operate in the city of london. the city's taxi drivers brought a legal challenge against a ruling that granted uber a probationary license to operate in the u.k. london's transit authority had previously revoked an earlier permit over safety concerns. initial offerings are plentiful despite a rocky pasture for -- past year for cryptocurrencies. about 70% a holding token sales. another 17 are planning ipos as of last week. the market is at a fraction of what it was back in 2018 but

are launching overseas instead of in the u.s. and are targeting wealthy investors. those are your top global tech stories of the day that we are watching. emily: rakitin is one of japan's biggest conglomerates and in the crosshairs of the trade war. we talked about a range of issues including have trade tensions are impacting business. he gave me an unexpected answer and talked about why rakuten has chosen not to go with huawei or zte as it is ambitiously building a new mobile network in japan. >> when we are deciding what kind of network we are going to use, i ask if i should use the chinese network or not. i kind of sense the potential risk and told myself something may happen to prohibit the chinese network to be used.

so i decided not to use huawei or zte because of the risk. so i don't know if it is true or not, but i did not choose this. if i had chosen that, i could not launch my service. i chose nokia. basically, we are building our own hardware. maybe in the next generation we will do our own. it's a totally different concept. we are an i.t. company. we are building a core network. we want to build all the technology by ourselves. emily: do you think the huawei

or zte business could be seriously compromised as a result? >> that is for sure. emily: i guess they are still huge companies on the chinese market. >> i don't know what is going to happen, to be very honest, but as far as the telecom industry is concerned, it is very difficult to use chinese vendors for a while. emily: fascinating revelation there, something we didn't know. this is a big e-commerce conglomerate but has these plans to build japan's fourth wireless network, somewhat controversial plans because he says he can do it with just $5.5 billion, but he said he is not using huawei or zte equipment aggressive

-- because of concerns about espionage. however, the japanese government concerns. every interesting, given all the controversy around huawei right now. the t-mobile chairman testifying in saying huawei equipment will never be in the t-mobile network. not looking good for huawei . shery: very interesting, other governments like new zealand are shutting huawei as well. i have to be honest, i used to shop at rakuten, i am a big fan. i love their products. now they're trying to take on softbank and amazon. what did the ceo say on that? emily: it's interesting, because rakuten has been struggling to take on amazon. amazon in japan is in some ways

beating out rakuten. so the decision to build a new mobile network is part of a strategy to globalize the on -- beyond simply an e-commerce giant. i asked who's the bigger threat, jeff bezos or another competitor and he said both. he said both our competitors, but interestingly, he was one of his first clients when he was an investment banker before he started the company. so this is part of a longer conversation you will see on an upcoming edition of studio 1.0. we talked about his ambitions, taking on not just amazon but softbank and the wireless industry in general. it is a fascinating conversation. shery: the battle of the billionaires. emily: always fun to talk about. we have much more ahead, so stick with us. this is bloomberg. ♪

emily: saudi arabia is looking for office space in san francisco for public investment funds. this followed similar moves from qatar and abu dhabi. the saudi fund has made several large investments in tech recently. this move comes months after saudi arabia faced international condemnation for the killing of journalist jamal khashoggi at its istanbul consulate. joining me is the ceo for the center of democracy in technology. what is your take on the unabashed expansion of the saudi investment fund into silicon valley? >> it is obviously a hot market and there is lots of foreign investment in silicon valley.

the concern is one of values and whose values are driving the creation of new products, services, and apps. we've seen some outcry over the creation or support of an app led by the saudi government that allows people to track female associates or relatives. these are concerning kinds of applications and we would obviously want to espouse values of equality and liberty. part of my organization's name is democracy and technology. the question is what kind of values are we embedding in the technology in our daily lives? emily: do you think these companies that have done business with the saudi's in the past will change their tune? nuala: it has been an age-old debate. it is a conflict up laws and cultures. the international internet

allows for the export of u.s. centric values by u.s. companies. vice versa from other countries and values and companies. we are at the conversational point about saudi arabia that we have been at about china and other countries and how they run their internal operations and how they use technology. emily: so where do you think this goes? there have been private talks about whether softbank -- whether they should take softbank money. do you think the issue dies, or does it continue to be an issue? i have yet to hear someone say we didn't take that $500 million because it came from softbank. nuala: think it's very difficult when there is that kind of money on the table to make those kind of choices for corporate leadership. but i do think the conversation is going to continue about the

values and the norms and the democratic principles bedded in the products and services to companies are creating and the sources that only a fun but of revenue from the sales of those products. i see those calls coming as much from with silicon valley and the employees of these companies as i do from outside and from groups like mine. i think it is a conversation we are just beginning in many parts of this country and around the world. this is not the last we will see of it. emily: a recent poll shows that facebook is one of the countries least trusted institutions. google and amazon are toward the top, yet facebook just reported earnings and it keeps growing. it doesn't seem to be losing users. people are still using it. how do you square that? nuala: it's a terrific platform in many ways. it is useful and free.

i do think we are having a conversation about the use of information and the use of personal information by companies of all kinds, not just in the tech sector. that may account for some of the difference in the various brands' trust factors. we are in a position to have a conversation about the use of personal information by all companies and respect and dignity that companies allow their customers, employees, and partners. i think we will see comprehensive privacy law in the united states in the near term to put us back on the global playing field about privacy and data. emily: how much do you think consumers want comprehensive privacy regulations? nuala: the pendulum has swung in a direction that more and more average users realize they're not getting a fair deal, as people in other parts of the world are getting in the protection and use of data and the disclosure of how the data are being used by the company.

i think there's a practical reality, people want to use the services and be part of the internet economy, but they want to have more balance of power between the individual and the companies themselves. emily: is that trend on a collision course with the business model of these companies that make money based on how much data we share with them and how much they can squeeze more value out of it? nuala: data is a source of power for many internet companies. i think there will be real changes and a come to the table meeting of all the companies and how they are using data and how the various business models work. hopefully we will see a race to the top in the conversation that has begun by a number of ceos across the united states in what their commitments are to the use of data about their customers. emily: can the u.s. catch up to europe at this point? nuala: that may not be the perfect model for the united states. they have different enforcement

mechanisms but there are global principles about dignity, transparency, accountability, about how these companies expand what they do and get consumer buy-in and do the right thing. as technology becomes embedded in the walls of our houses and the dashboards of our car, we want to know that we are being treated fairly and certain uses are simply out. it will be a slightly different american model, but the principles will be the same. emily: thanks so much for joining us back here. always good to have you. 2019 saw news outlets like buzzfeed and the huffington post cutting staff. it did not end with them. what is next for journalism and journalists in the digital age? this is bloomberg. ♪

emily: the start to 2019 has been sobering for the journalism industry. major publishers laid off thousands of employees. it is becoming the norm for journalism since the advent of the internet. at least 30% of newspapers experienced layoffs, the numbers 23% for digitally native outlets. the company maintains one of the world largest digital ad exchanges. it has over 34,000 advertisers and recently announced a partnership with google. it will be a full-time cloud-based service. many of these outlets launch with much fanfare and grew quickly, and now they are scaling back. what is happening? >> the underlying question is the business model, and the business model is one of advertising.

overall advertising is doing extremely well. it grew at twice the rate of the economy. digital advertising grew 15% and facebook grew 30%. there was a lot of money being made in advertising but there is asymmetry here. a lot of people's time is spent on sites and apps outside google and facebook, but the ad dollars are not matching that today. what is going on is that when you advertise on facebook, you reach a huge audience with a lot of data. so it is scaled, it's efficient, effective, and actually pretty easy. ad dollars are shifting over there, but markers want to be able to spend in more than two places. so the rest of the open web, they need an advertising model

that works more like what works on facebook and google. emily: i don't spend all my time on google and facebook. tim: that's the problem. i would call it people based marketing. what we need is a system that operates like people based marketing for the open web. so that the ad dollars can follow the users and the attention that being generated by all those great outlets with great journalist. emily: how do you do that? tim: you lean on companies like mine to innovate more and to get closer and provide a compliment to those big systems. emily: isn't that bad for google, your new partner? tim: google is a multifaceted player. they are a competitor and now a technology vendor. so we embrace all those aspects.

that is sort of the way the world works. emily: do you think the google and facebook model are under threat by relying so much on digital data? tim: no, they have a very strong position. they have a great trade-off between consumers and advertisers. emily: what about amazon? tim: it's really three players, not just the two players. amazon is building a very large advertising business very quickly. it has a number of great assets, amazing consumer data. it has millions of merchants who want to reach those consumers. emily: do you expect the ad business to feel the backlash around consumer concerns around privacy?

tim: it already has. anyone who is a practitioner of advertising understands, consumers need to understand what is going on, they need to participate and embrace the system. emily: how do we do that? tim: the right kind of regulations are going to be a good thing. what we worry about, 50 different sets of laws would be a big problem. if we could have one standard set of laws, ideally as global as possible, that enable permission-based marketing, that is a good thing. that's where we need to get to to build trust. emily: fascinating. glad to have you back on the show. tesla is rushing as many model threes to china as it can before the trade war truce with the u.s. expires on march 1. elon musk fears the two countries could ratchet tariffs backup. that would make electric cars more expensive in china and raise the cost of components china sends to you is simply

plants. is the rush warranted? >> it is warranted in the sense that the trade situation between the u.s. and china is very volatile, and that tesla is operating on a narrow band to be successful. as we been talking about for basically a year, they are under this production crunch and also scrambling to generate as much revenue and profit as possible. being able to get these cars into china before 25% possible tariff hike will be good for them. it shows how dependent tesla is on china. we saw a few weeks back, elon musk going to china, unveiling this money feel that will be the site of a factory. this company needs to do a lot

of business in china to have the future that it's ceo wants it to have. emily: i have a chart looking at tesla's revenue in china over the last several quarters. tesla's revenue third four in china, about 6% of global revenue. do you expect that to significantly increase with this china plant? >> definitely, and tesla needs it to increase. the demand for electric cars, china is the biggest market by a lot. some of that has to do with subsidies the chinese government is giving to buyers and the fact that there are really low-cost electric cars in china, but if you want to look at a market that is embracing this technology like nobody else, that is china. and obviously this is a huge market, if tesla wants to be a leading global manufacturer, it needs to have chinese sales role commensurate with the size of

the market. emily: so what types of tariffs might tesla face once this truce wears off? >> we don't know. it would be like a tit-for-tat situation where the chinese government would be responding to the trump administration. you could imagine an automobile tariff, that was talked about last year. there is also a cutout that the chinese government made for electric car manufacturers in the country, where before manufacturers had to have a local partner, now the chinese government is saying it is ok for tesla to open a factory on its own. you can imagine if the trade war intensifies, that could change as well and that would have huge implications for tesla. emily: the model three is coming in droves to china's shores. thanks so much for that update. that does it for this edition of

"bloomberg technology." thursday we will speak with the ceo of surveymonkey on their earnings results. we are live on twitter, you can follow our global breaking news network, tictoc on twitter. this is bloomberg. ♪

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