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The White House Made a Deal to Save ZTE. Is It Any Good?: DealBook Briefing

Commerce Secretary Wilbur Ross, center.Credit...Mark Schiefelbein/Associated Press

Good Thursday. (Was this email forwarded to you? Sign up here.)

Here’s what we’re watching:

• President Trump is meeting with Prime Minister Shinzo Abe of Japan. Trade’s likely on the agenda.

• Senator Bob Corker wants to rein in the Trump tariffs.

• Warren Buffett and Jamie Dimon are campaigning to end corporate America’s fixation on quarterly earnings estimates.

Commerce Secretary Wilbur Ross announced on Thursday that the U.S. has struck an agreement to save the embattled telecom company. But it’s unclear whether the White House has gotten a good deal.

The background: In April, the Trump administration blocked ZTE from buying U.S.-made equipment, a serious blow to the Chinese company. But in recent weeks, Mr. Trump has directed the Commerce Department to reach a compromise to help save the firm.

Here are the main details of the agreement, per Mr. Ross on CNBC:

• A $1 billion fine, and an additional $400 million penalty that will be held to cover potential future violations

• Changes to ZTE’s board and management team within 30 days

• A compliance team chosen by U.S. officials embedded in the Chinese company

“This should serve as a very good deterrent, not only for them but for other potential bad actors,” Mr. Ross said.

What the White House gets: A deal to save the embattled telecom company, by removing a ban on the sale of its equipment in the U.S., could aid the Trump administration’s trade negotiations with Beijing.

What critics say: An agreement could anger lawmakers who say that the White House shouldn’t pardon a company that violated U.S. sanctions against Iran and North Korea, and could also be viewed as a threat to national security.

The big question: In granting ZTE clemency, what will the White House get in return from Beijing?

— Michael de la Merced

That remains an open question, but the three have chosen an executive to run their health care venture, Mr. Buffett told CNBC. He said an announcement will come within two weeks.

There’s still opportunity for banks to find new customers and encourage existing ones to be more active.

Recently published figures from the World Bank show that around 1.7 billion adults do not have a bank account, with most of them in the developing world. That’s down from 2 billion in 2014.

But that’s not quite the whole picture. The percentage of active accounts around the world has risen from 52 percent to just 53 percent over the same period. That means that even if people are opening accounts, they’re still not using them. And in some countries, the use of bank accounts is actually falling.

But the World Bank offers some approaches that could be used to encourage further adoption, and use of, accounts:

Digitizing payments from government to people. “Digital payments of public sector wages alone have spurred big increases in account ownership in some developing economies. In Uzbekistan 17 percent of adults with an account opened their first account to collect public sector wages; in Jordan 10 percent did so.”

Digitizing payments from businesses to people. “Moving payments of private sector wages into accounts has already proved to be effective in increasing account ownership. Globally, about 200 million adults opened their first account to collect wage payments from a private sector employer.”

Digitizing payments for agricultural products. “Digitizing agricultural payments could cut the number of unbanked adults by up to a quarter or more in Mozambique, Nigeria, and Vietnam; by up to roughly a third in Burkina Faso and Sierra Leone; and by up to half or more in Ethiopia.”

Digitizing domestic remittances and formalizing saving. “Moving domestic remittances into accounts could be an especially effective way to increase account ownership in several economies. In Nigeria 37 percent of unbanked adults use domestic remittances; similar shares do so in Côte d’Ivoire, the Philippines, and South Africa.”

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Credit...Chang W. Lee/The New York Times

The N.F.L.’s Carolina Panthers sold for about $2.2 billion. The N.B.A.’s Houston Rockets fetched roughly that same price. With few signs that valuations will retreat anytime soon, Institutional Investor asks: Will future team owners need the backing of a deep-pocketed investment firm?

Some history

Traditionally, private equity firms haven’t taken ownership of sports franchises, in large part because leagues have preferred working with individuals or small groups of people. (One notable exception is Tom Gores splitting ownership of the Detroit Pistons with his firm, Platinum Equity.)

That has led to individual financiers paying out of pocket to become owners, as Josh Harris of Apollo Global Management and David Blitzer of Blackstone did with the Philadelphia 76ers.

The problem

Valuations of sports teams have skyrocketed in recent years. Probably the biggest culprit is the ever-increasing price for media rights, particularly as digital players like Facebook and Twitter bid against traditional TV networks.

The latest example: Amazon won the rights to show 20 Premier League soccer matches. We don’t know how much the ecommerce titan bid, but earlier this year, Sky bid about $4.8 billion to show 128 games, or about $37.5 million each.

As that money flows down to sports teams, their own valuations are going up. And that means, as the sports investment banker John Moag told Institutional Investor, having even $1 billion won’t be enough to afford a franchise:

“One person may be willing to put in $300 million to $500 million, but where will the remainder of the money come from? He will dial for dollars, but that’s still a huge amount of money.”

What remains to be seen

We can think of two issues that need to be addressed:

Whether sports leagues — which are governed by their individual owners — will drop their longstanding aversion to having Wall Street investment firms joining their ranks. Whether private equity firms would be willing to hold onto sports teams long enough to recoup their investments and make big profits, while avoiding the kinds of financial meddling that could destroy even championship franchises.

— Michael de la Merced

How do you raise a fund that’s as large as your two previous biggest combined? Reputation certainly counts for a lot.

And Mr. Trott, and his firm BDT Capital, seem to have plenty of that. Warren Buffett has described the financier as his favorite banker.

But can he raise a new fund of $9 billion, as the FT reports is his aim?

Mr. Trott certainly has a long list of accomplishments to cite in pitches to investors. He has become one of the premiere bankers for wealthy families like the Pritzkers, the scions of the Hyatt hotel fortune, and the Reimanns, the secretive German clan behind the consumer conglomerate JAB Holding.

More from Eric Platt and Mark Vandevelde of the FT:

The so-called family offices where Mr. Trott wields clout and raises much of his capital are garnering increasing power on Wall Street, as they hire investment teams to buy midsized companies outright instead of ploughing money into funds run by outside fund managers.

Working for so-called family offices has been good business for BDT. For example, the firm has helped JAB assemble its burgeoning food-and-coffee empire, which includes Peet’s Coffee, Keurig Green Mountain, Dr Pepper Snapple and, soon, the British sandwich chain Pret-a-Manger.

Such connections have helped Mr Trott’s company to strike its own investments — in partnership with those families — as well, like when it bought the high-end tequila brand Casa Dragones in April. He and his team are surely betting that more potential investors will want to sign onto that kind of deal flow.

The big question: Mr. Trott can probably raise the money. But since many private equity firms are sitting on a lot of cash that they can’t seem to spend, what will he buy with it?

— Michael de la Merced

Paul Achleitner, Deutsche Bank’s chairman, has spoken with top shareholders about merging with German rival Commerzbank, Bloomberg reports, citing anonymous sources. From Bloomberg:

Achleitner has discussed a combination of the two lenders with investors and key German government officials in recent months, said the people, who asked not to be identified discussing private conversations. While there are currently no formal discussions between the two banks and any such move is not imminent, the chairman is talking now with stakeholders about a possible deal down the road, they said. A Deutsche Bank spokesman declined to comment.

A key obstacle is Deutsche Bank’s depressed share price, with investors telling Achleitner that they don’t want a merger with Commerzbank at the moment because it would be highly dilutive and potentially trigger a capital increase and hefty write-downs, the people said.

In other Deutsch bank news:

Bloomberg reports that the German lender is exploring a sale of its $3 billion portfolio of non-investment grade energy loans, citing anonymous sources.

The bigger picture

The news comes amid a broad restructuring of Deutsche Bank’s business under its new chief executive, Christian Sewing. The bank plans to shrink its operations in the United States and Asia and focus on Europe. Mr. Sewing also said that the bank would aim to become less dependent on revenue from investment banking. As part of those efforts, the Deutsche Bank said it would cut 7,000 jobs and close its Houston offices.

Reports about potential new features for the image-sharing social platform highlight how its service appears to be increasingly pulled in multiple directions.

Earlier this week, citing anonymous sources, the WSJ reported on a new set of features that Instagram is working on:

The feature, which could allow videos of up to an hour in length, will focus on vertical video, or video that is taller than it is wide, one of the people said. The feature, if it launches, will do so within the Instagram app, another person said.

Techcrunch, citing more unnamed sources,, outlined the kind of content users might expect from the update:

Instagram will offer a dedicated space featuring scripted shows, music videos and more in vertically oriented, full-screen, high-def 4K resolution. Instagram has been meeting with popular social media stars and content publishers to find out how their video channels elsewhere would work within its app.

Benedict Evans, a partner at the venture capital firm Andreessen Horowitz, points out that in layering on new features, the photo-sharing service could turn itself into two distinct products:

A big question: What’s the best way to make money out of those two halves? As Mr. Evans also points out, the answer might not be totally straightforward:

It’s plausible that Instagram could break itself up into two apps. One could be focused more on messaging and peer-to-peer image and video sharing. The other might emphasize discovery and a greater tie-in to e-commerce, with judicious use of artificial intelligence to provide users with focused product recommendations.

But these are similar headaches to those that prompted Snap to redesign its Snapchat app, and that has so far been a disaster. So Instagram’s two halves could continue to coexist, with their awkward tensions in place.

— Jamie Condliffe

With Jonathan Bush, a co-founder, out at the health technology company, its board looks likely to move toward a sale.

Mr. Bush, cousin of George W. Bush, resigned yesterday under pressure from the $35 billion activist hedge fund Elliott Management. The immediate cause: recent revelations that he behaved inappropriately at work, and accusations that he had abused his ex-wife.

But the WSJ reported that Athenahealth’s board already favored a sale — and that some investors had worried Mr. Bush might interfere. The company has now said that it will explore a sale.

Michael de la Merced’s take: Ousting a C.E.O. usually makes a company more likely to be sold — especially if it’s under pressure from an activist. That’s likely to apply here. And given the challenges that Athenahealth faces in finding new business lines and updating its operations, it probably should be sold.

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Senator Bob Corker, Republican of Tennessee.Credit...J. Scott Applewhite/Associated Press

Senator Bob Corker, a Republican, has introduced a bipartisan bill requiring Congress to approve tariffs imposed for national security — Mr. Trump’s justification for levies on metals from Canada, Mexico and the E.U. (All are retaliating.)

The president asked Mr. Corker not to file the bill, which would be the most drastic move yet by Congress to check the White House’s protectionist policies. Whether Mr. Corker can get it passed with a veto-proof majority is up in the air.

Expect Mr. Trump to face more objections at the G-7 summit in Quebec, where Prime Minister Justin Trudeau of Canada has promised “very direct conversations” about trade. France and Germany say similar things.

But don’t expect him to listen: The WSJ predicts that Mr. Trump will persist with his aggressive trade policies, whatever they do to international relations.

Elsewhere in trade

• Businesses are worried about the state of the Nafta talks.

• JPMorgan Chase’s top quantitative strategist says the trade disputes have already destroyed more than $1 trillion in market value.

• The U.S. plan to save ZTE may flout national security advice.

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Warren Buffett, left, and Jamie Dimon, center.Credit...Donald Bowers/Getty Images For Fortune

In an op-ed for the WSJ, the investor and the JPMorgan Chase C.E.O. lay out a manifesto, supported by the Business Roundtable, for eliminating quarterly earnings estimates at public companies:

Companies frequently hold back on technology spending, hiring, and research and development to meet quarterly earnings forecasts that may be affected by factors outside the company’s control, such as commodity-price fluctuations, stock-market volatility and even the weather. The pressure to meet short-term earnings estimates has contributed to the decline in the number of public companies in America over the past two decades.

• Ivanka Trump reportedly connected Michael Cohen with a Russian weight lifter, who offered a meeting with Vladimir Putin, saying it could help the development of a Trump building in Moscow. (BuzzFeed)

• In asking for relief from U.S. sanctions on companies that do business with Tehran, European countries all but conceded that their efforts to save the Iran nuclear deal are failing. (WSJ)

• Mick Mulvaney has fired the Consumer Financial Protection Bureau’s expert advisory board. He plans to bring in a smaller group. (NYT)

• Prime Minister Theresa May is feuding with her cabinet over whether Britain should follow E.U. customs rules after Brexit. (Bloomberg)

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Google's Android operating system.Credit...Stephen Lam/Reuters

The European Commission is considering a big antitrust fine over promotion of Google products in the company’s Android mobile operating system, according to the FT.

The context: The E.U.’s antitrust chief, Margrethe Vestager, has been looking into whether Google improperly forced phone makers to favor services like the Chrome web browser and Google search. She has made no secret of wanting to be tough on America’s tech giants.

The question: Would anything change? Not much did when Google was fined $2.7 billion over its approach to comparison shopping. With a market value of $789 billion, the company can shrug off far more than that.

Elsewhere in Google news: Shareholders criticized the company’s approach to diversity at its annual meeting yesterday. And it will stop running political ads in Washington state because of its new disclosure rules.

• The conglomerate Fortive has bid $2.7 billion for Johnson & Johnson’s medical equipment sterilization business. (WSJ)

• Seventeen Chinese banks plan to go public and raise up to $14 billion. Demand may be tepid. (FT)

• Honest Company, the personal-care brand co-founded by Jessica Alba, collected a $200 million investment two years after failing to go public. (Bloomberg)

• Byron Trott, Warren Buffett’s favorite banker, reportedly plans to raise $9 billion for his merchant bank’s next fund, its biggest to date. (FT)

• Coinbase’s latest acquisition, Keystone Capital, suggests the cryptocurrency start-up wants to be a fully fledged broker-dealer. (WSJ)

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Credit...Pau Barrena/Agence France-Presse — Getty Images

The Trump administration has asserted that the superfast wireless technology known as 5G will be critical for national security. It even blocked Broadcom’s hostile bid for Qualcomm over fears that it would slow America’s 5G development.

But would that matter? Klint Finley of Wired coaxed some caveats from the co-author of a wireless trade body’s report on the subject:

Roger Entner, a founder of Recon Analytics and co-author of the CTIA report, concedes that it might not matter much if the US introduces 5G a few months later than China. Europe was quicker to roll out 2G, and Japan was the first with 3G, but that hardly deterred Apple and Google from dominating the smartphone market. But Entner argues that if China beats the US by a year or two, it could damage the US’s ability to compete in the global technology market.

Elsewhere in 5G news: Paul Jacobs, the former C.E.O. of Qualcomm, is setting up his own 5G firm.

• Amazon might soon sell home insurance. (The Information)

• The head of the S.E.C. said it wouldn’t change securities rules to accommodate cryptocurrencies. (CNBC)

• Facebook has announced a lineup of news programs specifically for its video platform. (Variety)

• Cybersecurity experts are doing very well out of insurers. (FT)

• Fidelity is said to be considering cryptocurrency trading. (Business Insider)

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Bloomberg Businessweek asks if the retailer could have had a happier fate, finding a disastrous $7.5 billion leveraged buyout made that impossible:

It’s become clear that Toys “R” Us didn’t only have an improvident amount of debt — it also had a debt structure as complex and precarious as a Jenga tower, which obscured the company’s tenuous finances.

• G.M.’s president, Dan Amman, is stepping down from Lyft’s board. It’s a bad sign for ties between the two companies. (Bloomberg)

• The editor of The Daily Mail, Paul Dacre, is stepping down after a 26-year reign at the British tabloid that was as politically divisive as it was commercially successful. (FT)

• The SoftBank Vision Fund poached Faisal Rahman from Deutsche Bank to run its Middle Eastern operations. (Bloomberg)

• Britain’s most expensive divorce involves a Russian oligarch and a $500 million yacht dry-docked in Dubai. (NYT)

• Asking for a raise works much better if you’re a white man, a study has found. (WaPo)

• China is building a global power network, and perhaps aiming to create a global electricity standard. (FT)

• The restaurateurs April Bloomfield and Ken Friedman have split their restaurant empire, after Mr. Friedman was accused of sexually harassing employees. (NYT)

• E-scooter sharing companies might not be the devil. They might be the future. (NYT)

We’d love your feedback. Please email thoughts and suggestions to bizday@nytimes.com.

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