China’s PMI contracts for the first time in three years. (Reuters)

The former CEO of Olympus tries to get his job back after the company was rocked by scandal. (Reuters)

A Reuters poll shows that U.S. and UK institutions have sharply cut EU debt. (Reuters)

A massive strike of UK teachers and public employees, based on resistance to government expense cuts, rocks the country. (Reuters)

Meg Whitman, the new CEO of Hewlett-Packard (NYSE: HPQ), will rely on increases in software revenue to revive the company. (Reuters)

AT&T (NYSE: T) and Deutsche Telekom may create a joint venture between AT&T Wireless and T-Mobile as a way to get around government objections to a buyout. (Reuters)

New insider trading charges may be brought against managers at Neuberger Berman, Diamond Back and Level. (WSJ)

Pilots at American Airlines hire Lazard to help them in negotiations. (WSJ)

S&P cuts its rating of HP by two notches. (WSJ)

Tepco says its Fukushima Daiichi nuclear complex was closer to a major disaster than previously thought. (WSJ)

Statistics agency Eurostat  says unemployment across the Euroblock rose to 16.3 million. (WSJ)

United Continental (NYSE: UAL) receives government approval to further integrate its operations. (WSJ)

Web entrepreneurs are concerned that a sales tax on Amazon.com (NASDAQ: AMZN) will spread to their businesses. (WSJ)

Walt Disney (NYSE: DIS) sharply increases its dividend. (WSJ)

Intuit (NASDAQ: INTU) to offer free smartphone tax advice. (WSJ)

Yahoo!’s board continues to favor the sale of a minority interest. (NYT)

Time Warner (NYSE: TWX) picks the head of Digitas to run Time Inc., a sign of a move away from print. (NYT)

Zynga’s IPO to be valued at $10 billion. (NYT)

Spain and France will try to raise money in a high-interest sovereign paper environment. (Bloomberg)

Douglas A. McIntyre

Economic problems to be the focus of G7 meetings. (Reuters)

One Super Congress member threatens to quit over concerns about military budget cuts. (Reuters)

Twitter has 100 million active users and another 100 million who rarely used the service. (Reuters)

Concerns about Bernanke’s comments on the economy push stocks lower. (Reuters)

Google (NASDAQ: GOOG) buys Zagat to compete in the local review market. (Reuters)

A large Yahoo! (NASDAQ: YHOO) shareholder pushes for changes on the board. (Reuters)

Nasdaq (NASDAQ: NDAQ) pushes opposition to the NYSE (NYSE: NYX) merger with Deutsche Boerse. (Reuters)

Small business at the center of Obama’s tax cut proposals. (WSJ)

Bank of America (NYSE: BAC) may cut 40,000 jobs. (WSJ)

China’s inflation drops to 6.2%. (WSJ)

Walmart (NYSE: WMT) to bring back layaway plans. (WSJ)

A large patent bill passes the Senate. (WSJ)

Zynga uses behavior targeting to improve revenue. (WSJ)

OECD cuts growth estimates for the U.S. and EU. (WSJ)

Amazon.com (NASDAQ: AMZN) may reach a deal with California on internet taxes. (WSJ)

FDA approves use of anticoagulant drug Xarelto from Johnson & Johnson (NYSE: JNJ) and Bayer AG. (WSJ)

Samsung to use more Microsoft (NASDAQ: MSFT) based tablets as Google Android tablets face legal problems from Apple (NASDAQ: AAPL). (WSJ)

Mortgage rates hit an all-time low of 4.12%. (WSJ)

Fannie Mae and Freddie Mac may settle with regulators over their disclosures of problems with subprime mortgages. (NYT)

Google defends its huge use of electric power. (NYT)

ESPN extends its deal with the NFL for $15.2 billion. (FT)

Different goals of AT&T (NYSE: T) and Deutsche Telekom (NYSE: DT) could hurt efforts to get government approval of the T-Mobile deal. (Bloomberg)

Questions over valuation stall the VW merger with Porsche. (Bloomberg)

Douglas A. McIntyre

AT&T has other obstacles to the transaction. Sprint-Nextel (NYSE: S) has self-serving objections. It will fall farther behind AT&T and Verizon Wireless if the deal is approved. Sprint already struggles to make money and keep its subscribers. Consumer groups are opposed as well. They say that the marriage will create a duopoly in the wireless market.

A warning about the debt load AT&T will shoulder is a reasonable one. Oddly, AT&T shares are near a 52-week high, but it may not be able to muster the sales growth necessary to pay for T-Mobile

AT&T’s landline business is in deep trouble and that will not end. People are “cutting the cord” of their home phones. These residents are more likely to use cellphones and VoIP communications tools. The largest profit centers AT&T and Verizon had a decade ago are decaying. That means cellular growth and home TV divisions have to grow rapidly to make up for the attrition.

The US cellular market is saturated. There are about 290 million cellular subscribers in America by most counts. The population is just over 311 million. Little children and some people don’t have or want phones. That means there are more handsets than their are people to use them. AT&T, Verizon Wireless, and Sprint fight for share in a slow-growing market. Each of these companies thinks it can charge more for data plans or faster connections. Consumers may reject that. Price wars may ensue which will depress margins just like in the airline industry.

The fiber-to-the-home projects created by AT&T and Verizon have been only modestly successful. They have not unseated incumbent technology like cable and satellite. That means the home TV market will not be a good one for them. The earnings that they hoped to get from fiber will not materialize even though they have already spent billions of dollars to build the infrastructure.

AT&T is likely to regret its plan to buy T-Mobile. It supposes that a larger subscriber base gives it an important advantage over Sprint and Verizon. That might be true if its businesses where not in bad shape already and headed for greater challenges still.

Douglas A. McIntyre

AT&T said the transaction would expand its LTE 4-G footprint.

“The number of AT&T shares issued will be based on the AT&T share price during the 30-day period prior to closing, subject to a 7.5 percent collar; there is a one-year lock-up period during which Deutsche Telekom cannot sell shares.”

AT&T Wireless has 93 million subscribers to Verizon Wireless’s 94 million. T-Mobile has 34 million and Sprint 50 million.

The deal leaves the troubled Sprint without a way to escape from its lingering problems. It has lost subscribers in most quarters over the last three years. It has also lost money over the majority of that time. Sprint does not have the leverage to attract Apple’s (NASDAQ: AAPL) iPhone 4 or iPad 2 products which means millions of customers will never chose it as a carrier.

Sprint depends on WiMax 4G which it has built out along with provider Clearwire (NASDAQ: CLWR). AT&T can cement its LTE 4G standard with the T-Mobile deal. Verizon Wireless also used LTE.

Sprint’s situation has gone from troubled to desperate.

Douglas A. McIntyre

AT&T and Verizon’s advantage in the market share race is that they have more capital than their competitors to underwrite the sales of expensive phones. They also have with wherewithal to add infrastructure to improve call volume and quality, although that has not helped AT&T and the bandwidth problems it has with data due to the Apple (NYSE: AAPL) iPhone.

It is Sprint that has taken the initiative and decided to invest billions to be first into the 4G market with WiMax. That would tend to undercut the FCC’s theory about which company can produce technology that will pick up market share. Sprint’s customer service is probably a bigger roadblock to gaining new subscribers than its size. AT&T and Verizon have not begun any significant deployment of the 4G LTE products. The should give Sprint an edge of at least two years.

T-Mobile is a division of Deutsche Telekom, one of the largest telephone companies in the world. If it has not invested more money in the US market to try to build its subscriber base, it is because it does not want to.

The FCC may try to set new rules to “protect” the smaller companies in the cellular business, but, if they need protection, it is because they have been badly run or have not spent enough money to win over customers. Protection could not have prevented that.

Douglas A. McIntyre

The company’s T-Mobile unit did not do well in the US. T-Mobile lost 77,000 customers in the quarter and revenue compared both with the previous quarter and with the same period last year. The company reported a total of 33.71 million customers, which represents about 12% of the US market. Market leader AT&T (NYSE: T) had 31.1% of the mobile market at the end of March, Verizon Wireless, a joint venture of Verizon Communications Inc. (NYSE: VZ) and Deutsche Telekom, had 25.2% of the market, and Sprint Nextel Inc. (NYSE: S) had 12%.

T-Mobile’s total churn rate for the quarter was 3.1%, better than the 3.3% in the previous quarter and flat with the first quarter of 2009. It actually did a little better with its contract customers, reducing its churn from 2.5% last quarter to 2.2%.

Average revenue per user (ARPU) remained flat with last quarter, but fell from the year-ago quarter. Total ARPU fell from $48 to $46, contract ARPU fell from $52 to $51, and prepaid ARPU fell from $21 to $18. A bright spot was the total data ARPU rate, which rose from $9.40 a year ago to $10.90 in the first quarter.

Like all other US carriers, smartphones and their data capabilities are driving profits for T-Mobile. The company offers several popular models of smartphones, but like everyone but AT&T, T-Mobile does not offer an iPhone from Apple, Inc. (NASDAQ: APPL). The company offers several smartphones that use Google Inc.’s (NASDAQ: GOOG) Android operating system, which has gained popularity in the smartphone operating system market.

The simple fact is that T-Mobile is not growing enough in the high-end part of the wireless market. Its data and smartphone offerings are solid, but they’re not compelling. There’s little reason to switch to T-Mobile because it doesn’t offer the still wildly popular iPhone nor does the company have a pricing program that will lure anyone away from another carrier.

Deutsche Telekom shares are up about 1.4% at $11.53 this morning.  Of course, shares are far more active in local market trading in Frankfurt.

Paul Ausick

Reuters:   The Senate approved a single audit of the Fed.

Reuters:   Morgan Stanley Group (NYSE: MS) is the subject of a federal probe of its activity in the mortgage derivatives market.

Reuters:   Regulators said they have no estimates for the costs to bail out Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE:FRE).

Reuters:   Nasdaq says more than 10,000 trades have been cancelled from the market plunge.

Reuters:   Microsoft Corporation (NASDAQ: MSFT) updated Office to better compete with Google Inc. (NASDAQ :GOOG)

Reuters:   Apple Inc. (NASDAQ: AAPL) questioned research that showed an increase in Android’s market share.

Reuters:   Nokia oy (NYSE: NOK) shuffled management to better compete in the smartphone industry.

Reuters:   The deal to take Fidelity National private may cost $15 billion.

WSJ:   The US has begun to probe Morgan Stanley.

WSJ:   Some firms objected to cancelled trades from the market collapse saying trades made them money legitimately

WSJ:   Verizon (NYSE: VZ) and Google are developing a iPad rival.

WSJ:   The German economy expanded.

WSJ:   Starbucks (NASDAQ: SBUX) will offer a new low-priced coffee–Seattle’s Best

WSJ:   GM may get back into car lending.

WSJ:   New legislation may force banks to creating living wills in the event that they become troubled.

WSJ:   Facebook is making progress in the ad sales business.

WSJ:   The US may break its oil regulator into two new agencies.

WSJ:   The FCC is considering a program to force cellphone companies to alert customers to charges.

WSJ:   Regulators want market-wide circuit breakers.

WSJ:   The price of gold reached a record.

WSJ:   The head of Intel (NASDAQ: INTC) expects strong growth.

WSJ:   A delayed cement plug is the focus of the cause of the Deepwater Horizon disaster.

WSJ:   Bank of America (NYSE: BAC) joined JPMorgan Chase (NYSE: JPM) and Goldman Sachs in having no trading losses in any day last quarter.

WSJ:   Shorts increased their bets on NASDAQ stocks.

NYT:   Some analysts see parallels between Greek debt and that of the US.

NYT:   The IMF is trying to get a more financial unified Europe.

NYT:   Microsoft Office will be free on the web.

NYT:   The Google-AdMob deal will face further review.

FT:   China consumer prices rose sharply.

FT:   Bank of New York-Mellon face fraud charges in NY State.

Bloomberg:   Deutsche Telekom (NYSE: DT) profits rose on mobile sales.

Douglas A. McIntyre

Wireless telecom provider Verizon (NYSE: VZ) has been trouncing AT&T (NYSE: T) for months in surveys of customer satisfaction and loyalty. But a recent survey by ChangeWave Research shows dropped calls are a growing problem for AT&T. Even Sprint Nextel (NYSE: S) and T-Mobile — a subsidiary of Deutsche Telecom (NYSE: DT) — could see gains as customers think of leaving AT&T over the network troubles.

Specifically, a March survey of 4,040 smartphone customers was conducted by ChangeWave Research, InvestorPlace.com’s consumer polling and research division. In it, Verizon customers reported only 1.5% of their calls being dropped over the past three months, the lowest in the smartphone industry. This is also the lowest percentage for a carrier ever recorded by ChangeWave in its smartphone customer surveys. Conversely, AT&T just reached its all time worst rating on this important measure. AT&T customers reported 4.5% of calls dropped in the last three months — three times that of Verizon.

Sprint came in at #2 with 2.4% of calls dropped, and T-Mobile #3 with 2.8% of calls dropped. AT&T was clearly the worst in the March survey, tacking on yet another increase over the last ChangeWave research survey. Furthermore, a closer look at the trends show an increasing number of dropped calls among AT&T customers surveyed, and a steadily decreasing number of dropped calls for Verizon customers.

The dropped calls correlate very closely with overall satisfaction with wireless carriers, according to ChangeWave. Findings from the March survey showed Verizon the clear leader in customer satisfaction, with 49% of those surveyed saying they are “very satisfied” with VZ service. This is in line with previous ChangeWave surveys, including a January ChangeWave survey where 50% of Verizon customers surveyed said they were “very satisfied.”

Sprint ranked a clear #2 behind Verizon, with 35% of those surveyed claiming they are “very satisfied” with their Sprint Nextel service. This is up markedly from a satisfaction rate of just 27% in January. Deutsche Telecom’s T-Mobile tied with AT&T with 23% of those surveyed stating they were “very satisfied.”

For the full research report click here

About ChangeWave Research: ChangeWave is a subsidiary of InvestorPlace Media, LLC, that identifies and quantifies “change” in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries. ChangeWave surveys network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.

Reuters:   Changes in the health care bill will go back to the House.

Reuters:   China described interest rates as a “heavy-duty weapon” in the war with inflation.

Reuters:   Dubai World creditors held $14 billion in debt in December.

Reuters:   A sale of MGM may be delayed.

Reuters:   Icahn and Lions Gate were in a verbal war over the firm’s value.

WSJ:   Founder  Brin drove Google (GOOG) to exit China.

WSJ:   Dubai will put $9.5 billion into Dubai World.

WSJ:   The death of Jerome York has made Apple’s board less independent.

WSJ:   Appaloosa Management and Carlson Capital are focuses of hedge fund investigations.

WSJ:   The  slow sale of Citigroup (C) troubled assets make it harder for the bank to make money.

WSJ:   Bank of America (BAC) will begin a plan to reduce mortgage principals.

WSJ:   Caterpillar’s (CAT) bottom line will be hit by health care costs.

WSJ:   Wells Farg0 (WFC) will buy some GMAC assets.

WSJ:   GE (GE) will sell its stake in an outsourcing business.

WSJ:   Google (GOOG) is urging Congress to take a bigger role in internet freedom around the world.

WSJ:   Deutsche Telekom (DT) said it is committed to the US market.

WSJ:   New home sales fell last month.

WSJ:   Wall St. will be looking at how much software Oracle (ORCL) actually sold last month.

WSJ:   3D movies are helping move up ticket prices.

WSJ:   ConocoPhillips (COP) will cut growth plans.

WSJ:   Honda’s (HMC) hybrid sales were better than the company expected.

WSJ:   Dell (DELL) will expand its services unit in China.

WSJ:   Nvidia (NVDA) will launch a chip aimed at AMD (AMD).

NYT:   Social Security will pay out more than it collects this year.

NYT:   China says it will not adjust its policy on the value of its currency.

NYT:   Regulators may directly oversee a Genzyme plant.

FT:   China Unicom (CHU) will not use Google search on its phones.

FT:   The US financial regulation bill appears ready to pass.

Douglas A. McIntyre

Redmond said that Dell (DELL), Garmin, Asus, HTC, Hewlett-Packard (HPQ), LG, Samsung, Sony Ericsson and Toshiba would put the mobile OS on some of their handsets. Carriers that will use the Microsoft product include AT&T (T), T-Mobile USA, Verizon Wireless, Sprint (S), Deutsche Telekom AG (DT), Orange, SFR, Telecom Italia, Telefónica, Telstra, and Vodafone (VOD).

The problem which will probably limit the success of the new Window product is that earlier versions are used by most of the world’s handset companies and cellular systems, but consumers have almost no interest in the OS.
Microsoft has to contend with current operating systems including the dominant Symbian product, a new OS from Intel (INTC) and Nokia (NOK), the OS from RIM (RIMM) which runs that Blackberry, and the Apple mobile OS for the iPhone. The greatest single competitor to Microsoft may be the new Google (GOOG) Android OS which is quickly gaining market share through deals with Motorola (MOT), HTC, and Google’s own handset, the Nexus One.

Microsoft has already been elbowed out of the mobile OS market and its is too crowded with good products for the world’s largest software company to work its way back in.

Douglas A. McIntyre