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Apple Lowers Some iPhone Prices Outside US To Offset Strong Dollar

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Apple Inc plans to cut the price of some of its flagship iPhones for only the second time in the device’s 12-year history, pegging its retail value to past prices in local currencies outside the United States instead of the rising U.S. dollar.

The move is an attempt to stem weak sales of the iPhone, particularly in overseas markets such as China, where a 10 percent rise in the U.S. dollar over the past year or so has made Apple’s products – which already compete at the top end of the market – much pricier than rivals.

Apple Chief Executive Tim Cook disclosed the plan on Tuesday after the company reported the first-ever dip in iPhone sales during the key holiday shopping period. The company has only once before cut iPhone prices, shortly after it debuted in 2007.

Apple did not say in which countries it would adjust iPhone prices. Resellers in China already began cutting iPhone prices earlier this month after Apple lowered its sales forecast for the quarter ended in December.

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The company priced its new iPhone XS, which was released in September, at $999, the same price in U.S. dollars as its predecessor, 2017’s iPhone X.

That worked for U.S. consumers, but in countries such as China and Turkey the local currency had fallen so much against the surging U.S. dollar, it made the phone significantly pricier than its predecessor a year before. Apple had essentially asked the consumer to bear the cost of the strengthening dollar.

On Tuesday, Cook said Apple will adjust foreign prices in some markets by resetting them at or close to what they were one year before in local currencies. Effectively that means Apple will absorb the cost of the strengthening dollar.

“We’ve decided to go back to (iPhone prices) more commensurate with what our local prices were a year ago, in hopes of helping the sales in those areas,” Cook told Reuters in an interview.

RISING DOLLAR HURTS APPLE SALES

In the company’s quarterly earnings call on Tuesday, Cook also highlighted the impact of foreign exchange problems in Turkey, where he said the local lira had depreciated by 33 percent against the dollar and Apple’s sales were down by $700 million from the previous year. In November, Apple also cited currency pressure on its prices in Brazil, India and Russia.

Apple has not said when or how often it might reset its prices because of foreign currency changes.

Chief Financial Officer Luca Maestri said the price adjustments may not extend to its services business, which includes Apple Music and the App Store.

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While that unit beat analyst expectations with $10.8 billion in sales in the quarter ended in December, growth has slowed compared to previous years.

Apple posts revenue drop but optimistic on China

Maestri said slower growth was partly because prices rose for users in non-U.S. markets.

“Roughly 60 percent of our services business is outside the United States, and as you know, the U.S. dollar has appreciated in recent months,” Maestri said. “And in general, we tend not to reprice our services for foreign exchange on a very frequent basis.” -Reuters

-Stephen Nellis

Current Affairs

As Wealthy Depart For Second Homes, Class Tensions Come To Surface In Coronavirus Crisis

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Topline: As New York City’s coronavirus cases exploded in recent weeks, residents fleeing to second homes have come under intense scrutiny and push-back, prompting officials in multiple states to create highway checkpoints screening for New Yorkers and a national travel advisory for the entire Tri-state area, highlighting the dramatic roles class and wealth will play in the pandemic. 

  • With over 56,000 coronavirus cases in New York, privileged New Yorkers with secondary homes are fleeing the City with massive effect on vacation home communities: the population of Southampton has gone from 60,000 a few weeks ago to 100,000 and rental prices in Hudson Valley rocketed from $4,000 to $18,000 per month—posing a threat to small-town hospitals that are ill-equipped to handle caring for high numbers of coronavirus patients.
  • In wealthy New England island communities like Nantucket, Martha’s Vineyard and Block Island that are heavy with secondary homes and short on hospital infrastructure, officials are going so far as to cancel all hotel, Airbnb and VRBO reservations while stationing state troopers and the National Guard to maintain flow on islands and, in the case of Rhode Island, instating 14 day mandatory quarantine on all people traveling to stay in the state from New York, New Jersey or Connecticut.
  • As outrage has grown at the privileged fleeing the city while middle and working classes remain confined in New York City apartments, there’s been social media clapback at ostentatious displays of wealth in isolation: Geffen Records and Dreamworks Billionaire David Geffen ultimately deleted his Instagram of his $570 million megayacht captioned: “Sunset last night..isolated in the Grenadines avoiding the virus. I’m hoping everybody is staying safe” after it sparked outrage on social media.
  • New York City’s poorer boroughs are hit hardest by coronavirus: Brooklyn and Queens, where median income is  $56,015 and $64,987, respectively, remain the epicenter of COVID-19, compared to Manhattan with average income of $82,459, which has been less permeated by the virus and is home to many of Manhattan’s wealthiest enclaves—and those most likely to have residents with second homes elsewhere.
  • On Saturday, President Trump said he was considering quarantining parts of New York, New Jersey and Connecticut, then, backed down and issued a domestic travel advisory for the tristate area that discourages residents of these states from non-essential domestic travel after “very intensive discussions” at the White House on Saturday night, said Dr. Anthony Fauci on CNN today: “The better way to do this would be an advisory as opposed to a very strict quarantine, and the President agreed.”
  • “Due to our very limited health care infrastructure, please do not visit us now,” reads a travel advisory from Lake Superior’s Cook County in Michigan, exemplifying vacation towns’ plea to travelers and second home owners across the country to stay away. 

Background: Coronavirus cases in the United States have skyrocketed to 124,000, with deaths doubling from 1,000 to 2,046 in two days. Since those with COVID-19 can be asymptomatic for days, their presence in remote communities may be deadly, as they can spread the virus and wreak havoc on rural hospitals. The clash between wealthy and poor, also creates state-versus-state hostility, as federal support is limited and essential to states overcoming coronavirus.

Alexandra Sternlicht, Forbes Staff, Under 30

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Moody’s Downgrades South Africa To Junk

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Credit ratings agency Moody’s has downgraded South Africa to junk status on day 2 of the country’s nationwide lockdown.

President Cyril Ramaphosa’s economic reform plans have been slowed by the coronavirus pandemic. The downgrade adds salt to injury for South Africa as it currently struggles with a recession it slipped into in early March.

“The unprecedented deterioration in the global economic outlook caused by the rapid spread of the coronavirus outbreak will further exacerbate South Africa’s challenges” said Moody’s.

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What You Need To Know About AfDB’s $3 billion “Fight COVID-19” Social Bond

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Landmark transaction, largest Social bond transaction to date in capital markets

Abidjan, Côte d’Ivoire, 27 March 2020 – The African Development Bank (AAA) has raised an exceptional $3 billion in a three-year bond to help alleviate the economic and social impact the Covid-19 pandemic will have on livelihoods and Africa’s economies.  

The Fight Covid-19 Social bond, with a three-year maturity, garnered interest from central banks and official institutions, bank treasuries, and asset managers including Socially Responsible Investors, with bids exceeding $4.6 billion. This is the largest Social Bond ever launched in international capital markets to date, and the largest US Dollar benchmark ever issued by the Bank. It will pay an interest rate of 0.75%.

The African Development Bank Group is moving to provide flexible responses aimed at lessening the severe economic and social impact of this pandemic on its regional member countries and Africa’s private sector.

“These are critical times for Africa as it addresses the challenges resulting from the Coronavirus. The African Development Bank is taking bold measures to support African countries. This $3 billion Covid-19 bond issuance is the first part of our comprehensive response that will soon be announced. This is indeed the largest social bond transaction to date in capital markets. We are here for Africa, and we will provide significant rapid support for countries,” said Dr. Akinwumi Adesina, President of the African Development Bank Group.

The order book for this record-breaking bond highlights the scale of investor support, which the African Development Bank enjoys, said the arrangers.

“As the Covid-19 outbreak is dangerously threatening Africa, the African Development Bank lives up to its huge responsibilities and deploys funds to assist and prepare the African population, through the financing of access to health and to all other essential goods, services and infrastructure,” said Tanguy Claquin, Head of Sustainable Banking, Crédit Agricole CIB.

Coronavirus cases were slow to arrive in Africa, but the virus is spreading quickly and has infected nearly 3,000 people across 45 countries, placing strain on already fragile health systems. 

It is estimated that the continent will require many billions of dollars to cushion the impact of the disease as many countries scrambled contingency measures, including commercial lockdowns in desperate efforts to contain it. Globally, factories have been closed and workers sent home, disrupting supply chains, trade, travel, and driving many economies toward recession. 

Commenting on the landmark transaction, George Sager, Executive Director, SSA Syndicate, Goldman Sachs said: “In a time of unprecedented market volatility, the African Development Bank has been able to brave the capital markets in order to secure invaluable funding to help the efforts of the African

continent’s fight against Covid-19. Not only that, but in the process, delivering their largest ever USD benchmark. A truly remarkable outcome both in terms of its purpose but also in terms of a USD financing”.

The Bank established its Social Bond framework in 2017 and raised the equivalent of  $2 billion through issuances denominated in Euro and Norwegian krone. In 2018 the Bank was designated by financial markets, ‘Second most impressive social or sustainability bond issuer” at the Global Capital SRI Awards.

“We are thankful for the exceptional level of interest the Fight Covid-19 Social Bond has raised across the world, as the African Development Bank moves towards lessening the social and economic impact of the pandemic on a continent already severely constrained. Our Social bond program enables us to highlight our strong development mandate to the investor community, allowing them to play a part in improving the lives of the people of Africa. This was an exceptional outcome for an exceptional cause,” said Hassatou Diop N’Sele, Treasurer, African Development Bank.

Fight Covid-19 was allocated to central banks and official institutions (53%), bank treasuries (27%) and asset managers (20%). Final bond distribution statistics were as follows: Europe (37%), Americas (36%), Asia (17%) Africa (8%,) and Middle-East (1%).

Press Release by the African Development Bank

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