Canadian pension plan wins telecom bid

Bell Canada agreed Saturday to be bought by a private partnership led by the Ontario Teachers Pension Plan in a deal valued at C$51.7 billion (US$48.5 billion) that would be the largest leveraged buyout ever.

The deal to take Canada's largest telecommunications company private, if approved by shareholders, would also be the largest takeover ever in Canada.

The Ontario Teachers Pension Plan Board, the U.S.-based Providence Equity Partners and Madison Dearborn Partners, LLC would buy BCE Inc. for C$51.7-billion which includes the assumption of C$16.9-billion (US$15.9 billion) worth of debt, preferred equity and minority interests, BCE said.

The Toronto-based pension plan — with assets of C$106 billion (US$99 billion) in 2006 — invests and administers the retirement funds for Ontario's 167,000 teachers and 104,000 retired teachers.

The pension plan was BCE's largest shareholder with a 6.3 percent stake.

Jim Leech, senior vice-president of Teachers' Private Capital, the investment wing of the pension plan, said this deal is larger than the February purchase of energy provider TXU Corp. by a consortium of buyout shops for a record $45 billion.

"This is bigger than that, but that's not why we bought it," Leech told The Associated Press in an interview. "It's a bit daunting."

Leech said the plan has been a major BCE shareholder since the early 1990s.

Michael Hlinka, an independent financial analyst, called the deal unique because it involves a leveraged buyout by a private partnership of a huge public company.

"The system worked in that Bell shareholders were not happy with the current management and ... the way the company was run," and were able to receive a substantial premium over the share price, Hlinka said.

The investor group will acquire all of the common shares of BCE not already owned by Teachers for an offer price of C$42.75 per common share. The stock traded at C$31.33 at the start of the year and has been as low as C$25.32 in the last year. It closed at C$40.34 on Friday.

Hlinka said that for the amount being offered by Teachers, the new owners will have to improve BCE's earnings to make the deal beneficial.

BCE Chairman Richard J. Currie said the deal provides great value for shareholders.

"We were charged with managing one of the world's largest private equity transactions, certainly the largest in this country," Currie told reporters in a conference call. "We had to do it within the relatively small market of Canada and we had to cope with foreign ownership restrictions which capped participation of non-Canadian companies at 47 percent equity."

BCE chief executive Michael Sabia said the offer is a 40 percent premium over the average price for BCE shares over the past year.

"This is a huge amount of value delivered to our shareholders," he said on the same conference call.

The group led by the pension plan won out several other bidders including New York-based Cerberus Capital Management LP with billionaire Hong Kong-based Canadian citizen Richard Li's Pacific Century Group, and the Canada Pension Plan Investment Board with backing from American buyout firm Kohlberg Kravis Roberts & Co.

Telus, Canada's second-largest telecom company, pulled out of the bidding last Tuesday.

The deal will require approval from shareholders as well as federal government regulators. Leech said BCE's headquarters will remain in Montreal.

BCE, which has more than 54,000 employees, had annual revenue of $C17.7 billion (US$16.4 billion) in 2006. It has 18.2 million customer connections, including 5.8 million wireless subscribers, 8.64 million phone lines, 1.94 million internet subscribers and 1.82 million satellite television subscribers. Other BCE holdings include interests in CTVglobemedia, one of the biggest Canadian media companies that owns the Globe and Mail newspaper and CTV television.

Regulators set new subprime loan standards

WASHINGTON - Banking regulators on Friday completed guidelines that call on lenders to strictly evaluate borrowers’ ability to repay home loans.

The guidance issued by the Federal Reserve and the other four federal agencies that regulate banks, thrifts and credit unions, comes in response to an increasingly troubled housing market and pressure from Congress. Home prices have been falling and mortgage defaults have been rising, especially among so-called subprime mortgages given to buyers with shaky credit.

The standards, which are voluntary and only apply to federally regulated lenders, calls for verification of borrowers’ incomes in most cases. Consumers should have clear disclosures of their mortgage terms and should have at least 60 days to refinance a loan that is about to jump up to a higher rate without penalty.

In a prepared statement, Federal Reserve Governor Randall S. Kroszner said “it’s only good business sense for the lenders and it is the right thing to do for the borrowers’ sake.”

The chair of the Mortgage Bankers Association said the guidelines come with a downside — they will reduce the availability of credit for borrowers — and he urged Congress not to pass legislation that would put similar standards for borrowers into law.

Lawmakers, some of whom accuse the Fed of being lax in its oversight of the mortgage market for many years, have been urging the central bank to strengthen the guidelines. While the guidelines would not affect state-regulated mortgage companies, many state banking regulators are expected to follow suit.

In addition to the Fed, the agencies issuing guidance are the Federal Deposit Insurance Corp., the National Credit Union Administration, and the Treasury Department’s Office of the Comptroller of the Currency and Office of Thrift Supervision.

Sheila Bair, the FDIC’s chairman, said in a statement that, because the guidelines won’t affect non-bank lenders, who have been the main originators of subprime loans, it is “essential for Congress or the Federal Reserve to establish comparable principles” for all lenders.

Indeed, the Fed is weighing a crackdown on all lenders, not just those who are federally regulated, and several Democratic lawmakers are pushing for tougher standards.

In recent weeks, the mortgage market’s troubles have again sparked fears that they could impact the broader economy. Two Bear Stearns Cos. hedge funds nearly collapsed due to bad bets on mortgage securities.

Banc of America Securities said in a report last week that the troubles could signal the “tipping point of a broader fallout from subprime mortgage deterioration” that could lead to higher rates for new home loans.

Homeowners with about $515 billion in adjustable-rate home loans will see their monthly mortgage bills rise this year as rates reset to higher levels, and another $680 billion worth of mortgages will reset next year, the Banc of America report said. Of those adjustable rate loans, more than 70 percent are subprime.

Exxon, Conoco refuse to sign Venezuela deal

CARACAS, Venezuela - Exxon Mobil Corp. and ConocoPhillips refused to sign deals Tuesday to keep pumping heavy oil under tougher terms in Venezuela’s Orinoco River basin, signaling their departure from one of the world’s largest oil deposits.

Analysts said the move, however, won’t have a major effect on supplies or lead to higher prices at U.S. pumps because production by the two companies will shift to other producers who agreed to the pacts.

Four major oil companies — U.S.-based Chevron Corp., BP PLC, France’s Total SA and Norway’s Statoil ASA — signed deals to accept minority shares in the oil projects under new terms set by President Hugo Chavez’s government.

“Exxon Mobil is disappointed that we have been unable to reach an agreement on the terms,” the Irving, Texas-based company said in a statement. “However, we continue discussions with the Venezuelan government on a way forward.”

The changes are part of a broader nationalization effort by the Chavez government to assume greater control over “strategic” sectors of the economy. Aside from the oil industry, the government recently nationalized the country’s top telecommunications and electricity companies.

Elogio Del Pino, a director of the state oil company, said Houston-based ConocoPhillips, the third largest U.S. oil company, is not leaving the country completely and will maintain a 50-percent share in the Deltana Platform natural gas project.

Officials said Exxon Mobil, the world’s largest publicly traded oil company, will have no remaining oil interests in the South American country.

Venezuela “has an informal agreement to continue talking” with Exxon Mobil and ConocoPhillips about the terms of finalizing their involvement in the heavy crude projects, Oil Minister Rafael Ramirez said at a signing ceremony in Caracas.

“In the case of Exxon Mobil and ConocoPhillips, they are ending their participation in the businesses” of the Orinoco and other exploration activities, Ramirez said. “We are talking with both companies to continue negotiations to establish settlements.”

Ramirez said the signed agreements will benefit Venezuelans. He thanked the companies that agreed to the new terms, saying they are working toward a “secure future” in Venezuela.

It remains unclear how the companies are being compensated for their losses. The six companies invested more than $17 billion in the Orinoco projects and hold some $4 billion in outstanding debts, but Petroleos de Venezuela SA, also known as PDVSA, would not be assuming those obligations, Ramirez said.

“Each company is responsible before the banks for its commitments,” he told reporters.

The U.S. State Department urged Venezuela to provide proper compensation.

“The government of Venezuela, like any other government, has the right to make these kinds of decisions to change ownership rules,” said State Department spokesman Tom Casey. “We want to see them meet their international commitments in terms of providing fair and just compensation.”

If successful, iPhone could raise the bars

The iPhone won't stop global warming. It won't bring peace to the Middle East. But if it lives up to even a portion of the hype, it does have the potential to change how people interact with their cell phones, computers and each other.

Apple Inc.'s iPhone, combining a mobile phone, iPod and Internet browser into one handheld gadget, could represent the closest consumers have come to carrying their life with them wherever they go.

With their photos, music, videos, friends and news at their fingertips, they won't have to leave any of it behind when they're away from home or the office.

Some already have started to embrace this lifestyle with smart phones such as the Blackberry, but none of the iPhone competitors on the market offer quite as much as Apple is promising. Looking back, the iPhone could mark a tipping point, encouraging the masses to look at their cell phone as more than a cell phone and prompting profound changes in everything from privacy to citizen journalism. It could -- assuming the iPhone succeeds -- help introduce a new age of mobile living.

"The iPhone has the potential to raise the level of technology that each one of us carries every day," said Kevin Almeroth, associate director for UC Santa Barbara's Center for Information Technology and Society.

Though the buzz around the iPhone has been overwhelming, it could be because Apple and its mastermind, CEO Steve Jobs, have been down this road before. In the 1980s, the Cupertino technology company helped pioneer the era of home computers with the simple-to-use Mac. More recently, it helped usher in the digital media age, making music, television shows and movies available on the Web and on a portable player, the stunningly successful iPod.

The iPhone is Jobs' latest gamble. The technology industry has long talked about mobile computing, untethering people from their machines yet allowing them to stay in touch.

But that promise has largely been unfulfilled. Smart phones have come the closest, but even the best of that bunch have offered only limited Web access.

Jobs aims to fulfill that elusive promise in part by incorporating a full Internet browser on the iPhone. "It's like having your whole life in your pocket," Jobs said as he unveiled the iPhone in January. "It's the ultimate digital device."

With its sleek, simple design, the iPhone targets the average Joe and Jane, making smart phones more accessible than before. It took Elisabeth Halvorson, a small business owner in Corte Madera, almost a year to get the hang of using her Blackberry. "My learning curve would be shorter with the iPhone," said Halvorson, who is considering one after her cell phone contract expires next year.

But the iPhone in its current form has its limits. It isn't running on the fastest cell phone network. Its touch screen interface may not be that easy to use. It doesn't have GPS, the mapping technology that gives turn-by-turn directions. It doesn't let users download music and videos wirelessly; they still need to connect to their computer to do that.

Though Apple recently announced extended battery life for the device, some still worry it isn't enough. And at $500 to $600 apiece, plus a two-year contract with AT&T, it isn't cheap.

"That it will dominate the entire space is getting a little ahead of itself," said Adam Sexton, chief marketing officer for Groove Mobile, which manages Sprint's cell phone music downloading service.

Furthermore, not all of Apple's products have hit the mark. Who can forget the much maligned Newton, a personal digital assistant that failed to catch on during the 1990s? It's also still too early to see whether the Apple TV, which transfers a user's iTunes media library to the television, lives up to its goal of connecting the computer to the living room. So far, only a few thousand Apple TVs, which hit stores in March, and similar devices have been sold each month, according to Ross Rubin, an analyst with NPD, a market research firm.

Jobs said he expects to sell 10 million iPhones by next year, taking just 1 percent of the world's cell phone sales. Yet even if it doesn't end up in every consumer's hands, it could drive them to consider other smart phones or take advantage of features already on their cell phones.

And that, in and of itself, would trigger a big change in the world of handheld computing.

Only a small, though increasing, number of consumers makes more than just calls on their cell phones. About 4 percent watched video, and 12 percent listened to music on their cell phones during the first quarter of 2007, according to the research firm Telephia. In March, about 12 percent surfed the Web on their phones, the company said.

That could soon grow and lead to significant changes. The increased use of handheld Internet devices could, for instance, further the citizen journalism and self-broadcasting movement with more people not only able to take photos and videos with their phones, but also post them right away on the Internet.

Imagine if even more people had the ability to publish photos and videos from the aftermath of Hurricane Katrina or the recent shooting at Virginia Tech. "Now you start to have a platform to do more than just talk or buy music," Almeroth said. "There is all sorts of sharing that could happen."

Activists already have used cell phones to mobilize around a cause, such as sending text messages to rally supporters. But they could do even more with tools such as the iPhone, said Howard Rheingold, author of "Smart Mobs: The Next Social Revolution" and a professor at Stanford University.

"Those are hints to what people are going to do," he said. "But in what way will they band together to do things they haven't done before? That's the million-dollar question."

But at the same time that instant connection could generate greater privacy concerns. Camera phones already have caused problems, from Peeping Toms snapping pictures in dressing rooms to embarrassing incidents caught on camera.

The "widespread deployment of these devices means all the privacy concerns we've had are exacerbated," said Almeroth.

Many mobile applications already allow people to record and upload videos to YouTube, Flickr and other photo- and video-sharing sites. A partnership between the San Francisco Internet company Six Apart and Nokia lets bloggers send photos and videos to their sites directly from their phones.

It all taps into a phenomenon already thriving on the Internet known as Web 2.0. People like to see what their friends are doing, from keeping track of their friends' status and moods on social networking sites like Facebook and MySpace to trying out the music their friends are listening to on sites such as iLike and Last.fm, said Martin Stiksel, co-founder of Last.fm.

Young people are "constantly waiting for their friends to send them new links, new photos. It's a new sort of entertainment," he said. Now smart phones are offering "a great opportunity to capture what happens not only in the office and living room, but also in the park or walking down the street or sitting on the bus."

Much of that enthusiasm is being channeled into the iPhone, with software developers already rolling out new, iPhone-ready applications. Digg, a user-edited news site in San Francisco, has already customized an application. Developers also have created programs for people to instant message, make travel arrangements, find the best gas prices, compare prices online as they're shopping and make to-do lists on the iPhone.

"There's a lot of excitement around the basic technology that Apple is embedding in the phone," said Chris Messina, a Web 2.0 entrepreneur who is helping to organize an iPhone developers camp, iPhoneDevCamp, next month. "It's the first time we've had a full-powered Web browser that does everything your desktop Web browser does."

Of course, none of this is new. But Jobs has a knack for tapping into a growing trend at the right time. "Let's see if they can do it again," Stiksel said. "The jury is still out."

Google pushes 100-mpg car

Offers millions to advance plug-in hybrid vehicles and other technologies that link nation's transport system to the electric grid.

Google said Tuesday it is getting in on the development of electric vehicles, awarding $1 million in grants and inviting applicants to bid for another $10 million in funding to develop plug-in hybrid electric vehicles capable of getting 70 to 100 miles per gallon.

The project, called the RechargeIT initiative and run from Google's philanthropic arm, Google.org, aims to further the development of plug-in hybrid electric vehicles - cars or trucks that have both a gasoline engine and advanced batteries that recharge by plugging into the nation's electric grid.

"Since most Americans drive less than 35 miles per day, you easily could drive mostly on electricity with the gas tank as a safety net," Dan Reicher, director of Climate and Energy Initiatives for Google.org, wrote on the organization's Web site. "In preliminary results from our test fleet, on average the plug-in hybrid gas mileage was 30-plus mpg higher than that of the regular hybrids."

The project also aims to develop vehicle-to-grid (V2G) technology, allowing cars to sell their stored power back to the nation's electricity grid during times of peak demand.

"Linking the U.S. transportation system to the electricity grid maximizes the efficiency of our energy system," said Reicher. "Our goal is to demonstrate the plug-in hybrid and V2G technology, get people excited about having their own plug-in hybrid, and encourage car companies to start building them soon."

General Motors (Charts, Fortune 500) has promised to sell a plug-in hybrid version of its redesigned Saturn Vue SUV but has not set a specific date for production. The company has contracted with two battery suppliers to work on an improved battery technology for the vehicle. The company is also working toward a production version of its Chevrolet Volt, a plug-in hybrid concept car shown at the 2007 Detroit Auto Show. That vehicle would be driven entirely by electricity with an on-board engine used only as a back-up generator.

Ford Motor Co. (Charts, Fortune 500) also has a drivable plug-in hybrid demonstration vehicle based on the Ford Edge SUV. Similar to GM's Chevrolet Volt in its basic engineering, that vehicle uses a hydrogen fuel cell as a back-up generator but could use a gasoline engine or some other type of motor to charge the batteries.

Because they have to store up and release large amounts of electricity, plug-in hybrids require more advanced batteries than hybrid vehicles currently on the market. The batteries in non-plug-in hybrid vehicles continuously store and release small amounts of electricity, a work cycle that puts little strain on the batteries.

While many people don't associate Google with energy, analysts say the fit isn't all that unnatural.

Renewable energy, unlike coal or nuclear, will likely come from thousands or tens of thousands of different locations. Analysts have long said that one of the big challenges will be managing that flow into and out of the nation's electric grid, and that companies that manage the flow of information are well placed to handle that task.

The $1 million in Google grants went to Brookings Institution to run a conference on plug-ins, CalCars and Plug-In America to educate the public about plug-ins, and the Electrical Power Research Institute, the Rocky Mountain Institute and Dr. Willett Kempton from the University of Delaware for plug-in R&D.

Google (Charts, Fortune 500) also said it has turned on its massive solar panel installation at the company's Mountain View, Calif. headquarters.

At 1.6 megawatts, Google said it's the biggest solar project on a corporate campus in the United States, and one of the largest in the world.

Robots to search unexplored Arctic for new life

BOSTON, Massachusetts (AP) -- Researchers hope newly developed robots will give them their first look at a mysterious ridge located between Greenland and Siberia.

The Gakkel Ridge, encased under the frozen Arctic Ocean, is steep and rocky, and scientists suspect its remote location hosts an array of undiscovered life.

Researchers from the Woods Hole Oceanographic Institution on Cape Cod plan to begin a 40-day expedition of the ridge on July 1. They plan to use the robots to navigate and map its terrain and sample any life found near a series of underwater hot springs.

Tim Shank, lead biologist on the international expedition, said researchers have no idea what new life at the ridge might be like.

"I almost think it's like going to Australia for the first time, knowing it's there, but not knowing what lives there," he said.

The Gakkel Ridge marks a 1,100-mile stretch from north of Greenland toward Siberia, where the North American and Eurasian tectonic plates continuously move away from each other.

Scientists believe new life could be discovered there because of hot springs that are created at such tectonic boundaries when ocean water comes into contact with hot magma rising from the earth's mantle.

The organisms known to exist in the Arctic basin, where the Gakkel is located, may have evolved in a unique fashion because they were mostly isolated from the life in the deep waters of other oceans for all but the last 25 million years, said Robert Reves-Sohn, the expedition's lead scientist.

The job of reaching any new organisms at the ridge falls to scientists operating three new robotic vehicles, two of which are designed to navigate untethered under the ice.

The two robots, named Puma and Jaguar, cost about US$450,000 (euro335,000) each and received significant funding from NASA because their mission is similar to what scientists hope to do in a future exploration under the ice of one of Jupiter's moons, Europa.

The robots are built to descend to about 5,000 meters and work 5 to 6 meters off the bottom, photographing and removing samples, said Hanumant Singh, the project's chief engineer.

The advances are no guarantee of success, however.

The hot springs are difficult to find in far less challenging conditions and the margin for error is thin, since the robots cannot surface through the ice and be retrieved if there are problems.

Singh said the excitement of finding new organisms and understanding the geology in the Arctic outweighs any risks to the robots.

"Even though we know there's a strong probability, or there's a reasonable probability of losing a vehicle, it's still worth it," he said.