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Wirecard’s Missing Billions Forces Out CEO, Panics Lenders – Yahoo Canada Finance

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(Bloomberg) — Markus Braun’s almost two decades as Wirecard AG’s chief executive officer ended after accusations about the company’s accounting culminated in a shock disclosure that it was unable to locate 1.9 billion euros ($2.1 billion).

James Freis has been appointed interim CEO, the German payments company said in a short statement Friday. A recent hire and former compliance executive at Deutsche Boerse AG, Freis was only named as a member of the management board on Thursday.

Braun’s exit comes after a catastrophic few days for Wirecard, which suffered a share price collapse after the two Asian banks that were alleged to be holding the missing cash denied any business relationship with the company.

Read More: Germany’s Fintech Star Falls on Failure to Clean Up Wirecard

Wirecard is now facing a potential cash crunch. The company warned Thursday that loans of as much as 2 billion euros could be terminated if its audited annual report is not published on Friday. Analysts at Morgan Stanley estimated that Wirecard has available cash of around 220 million euros if it cannot locate the missing $2.1 billion.

Wirecard’s lenders are considering hiring outside help as they seek to navigate the risk of a potentially massive default, a person familiar with the matter said.

Named CEO in 2002, Braun has put tens of millions of euros of his own funds into the firm. The value of his stake, which once made him a paper billionaire, has dwindled in the course of the rout.

His replacement is stepping into an almost unprecedented situation. Freis wasn’t supposed to join until July, when he was going to be responsible for a newly created department called “Integrity, Legal and Compliance.”

Freis was previously head of compliance at Deutsche Boerse AG, and held the position of Director of the U.S. Treasury Department’s Financial Crimes Enforcement Network, where he was responsible for the regulation of financial institutions.

The interim CEO will need to quickly reassure Wirecard’s business partners. Wirecard has licenses with Visa, Mastercard and JCB International, through which Wirecard’s banking arm issues its credit cards. If Wirecard is unable to find its missing cash, Visa and Mastercard may have cause to revoke the licenses.

“The big question is whether they retain the Visa and Mastercard licenses,” Neil Campling, analyst at Mirabaud said. “Without those they have no business.”

Mastercard said it is following the developments at Wirecard but did not want to comment on specific customer conversations or situations. Visa did not have an immediate comment.

Missing Cash

Wirecard claimed on Thursday that auditor Ernst & Young couldn’t confirm the location of the missing cash that was supposed to be held at two Asian banks and reported that “spurious balance confirmations” had been provided.

The confusion deepened on Friday when BDO Unibank Inc., the Philippines’ largest bank by assets, and the Bank of the Philippine Islands, said on Friday that Wirecard isn’t a client.

“It was a rogue employee who falsified documents and forged the signatures of our officers,” BDO Unibank CEO Nestor Tan said in a mobile phone message. “Wirecard is not even a depositor — we have no relationship with them.”

A document purporting to show a link between Wirecard and the Bank of the Philippine Islands was “bogus” and may be part of an attempted fraud, the president of the Southeast Asian lender said in a phone interview.

Wirecard shares plunged as much as 52% in Frankfurt on Friday. The selloff in Wirecard’s bonds also intensified, with the company’s 500 million-euro bonds maturing in 2024 falling a further 14 cents to trade at 24 cents. Its 900 million euros of convertible bonds are now indicated at less than 10 cents on the euro.

Wirecard was worth 24.6 billion euros in September 2018 when it entered Germany’s Dax index, and widely considered as one of Germany’s few successful fintech stories. It was valued at about 2.4 billion euros on Friday morning.

Wirecard spokespeople did not return calls and emails for comment.

Historic Slump

Wirecard’s reversal of fortune has caught its supporters off guard. Some of the company’s most loyal shareholders are now dumping their stakes as allegations of accounting impropriety engulf the German payments company. Analysts are also quickly changing their recommendations, despite continued concerns about the company’s accounting.

As of Wednesday, 10 out of 25 analysts tracked by Bloomberg recommended buying the stock. Since then, at least nine analysts have removed their recommendations and three have downgraded the stock to sell.

German financial markets regulator BaFin said it is also examining Wirecard’s disclosure on Thursday as part of its investigation into whether the company violated rules against market manipulation, according to a spokeswoman.

BaFin has three investigations of Wirecard running: whether the company manipulated markets with its disclosures, whether Braun’s stock purchase ahead of the planned publication of the company’s annual report violated market abuse roles and whether the company and its management are fit to be the owners of a bank.

Fraud Claims

Braun has previously painted the company as a potential victim, resisting calls to resign and aggressively defending Wirecard against accusations of accounting fraud, led by a series of articles in the Financial Times.

“It cannot be ruled out that Wirecard has been the victim in a substantial case of fraud,” Braun said in a statement published overnight.

The company temporarily suspended its outgoing Chief Operating Officer Jan Marsalek, it said in a statement late Thursday. Marsalek — who has been suspended on a revocable basis until June 30 — had tried to get in touch with the two Asian banks and trustees over the past two days to recover the missing money, but wasn’t successful, a person familiar with the matter said Thursday. It’s unclear if the funds can be recovered, the person added.

German politicians are now asking how such a rapid collapse could happen to a fintech company that was once worth more than Deutsche Bank, and previously supported by local regulators. Early last year BaFin took the unprecedented step of temporarily banning short sales of Wirecard shares following reports of suspicious accounting practices.

“Markus Braun’s resignation was overdue,” said Danyal Bayaz, a lawmaker with Germany’s Greens. “Wirecard is not a small fintech, but a DAX member.”

(Updates with statement from Visa and the Bank of the Philippine Islands.)

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

The Canadian Press. All rights reserved.

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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