Syrian rebels renew fight for Aleppo

Syrian rebels battled President Bashar al-Assad's forces in and around the northern city of Aleppo on Sunday, seeking to reverse gains made by loyalist forces in the commercial hub over the last two months, activists said.

The fighting, by a variety of insurgent groups, happened as France urged moderate rebels to wrest territory back from radical Islamists whose role in the fight to topple Assad poses a dilemma for Western countries concerned that arms shipments could fall into the hands of people it considers terrorists.

The 11 Western and Arab countries known as the "Friends of Syria" agreed on Saturday to give urgent military support to the rebels, channeled through the Western-backed Supreme Military Council in a bid to prevent arms getting to Islamist radicals.

But radical forces showed they remained formidable on Sunday when the Islamist Ahrar al-Sham brigade detonated a car bomb at a roadblock at an entrance to Aleppo killing at least 12 loyalist soldiers, according to the opposition Aleppo News Network and other activists in the city.

Aleppo, 35 km (20 miles) south of Turkey, has been contested since July last year, when rebel brigades entered the city and captured about half of it. In recent weeks, Assad has focused his military campaign on recapturing rebel-held areas.

He has also been expanding control of the central province of Homs after capturing a strategic town on the border with Lebanon, and has used heavy bombardment and siege warfare to contain rebels dug in around the capital, according to opposition sources and diplomats monitoring the conflict.

Firas Fuleifel, with the moderate Islamist al-Farouq Brigade, said six rebel fighters were killed in fighting in Aleppo in the last day.

WIN BACK CONTROL

French President Francois Hollande, whose country has been at the forefront of Western efforts to re-organize and back the opposition, said moderate rebels must take territory held by radical Islamists whose involvement in the conflict, he said, gives Bashar al-Assad a pretext for more violence.

"The opposition needs to win back control of these areas ... they have fallen into the hands of extremists," Hollande told a news conference in the Doha a day after the Friends of Syria met in the Qatari capital.

"If it seems that extremist groups are present and tomorrow they could be the beneficiaries of a chaotic situation, it will be Bashar al-Assad who will seize on this pretext to continue the massacre," Hollande said.

In Damascus, the Ahrar al-Sham and the Islamist Tawhid al-Asima brigades detonated a car bomb in an area known as Mezze 86, inhabited by members of Assad's Alawite sect, an offshoot of Shi'ite Islam that has controlled Syria since the 1960s. Two people were killed, the Syrian Observatory for Human Rights monitoring group said.

Rebels also attacked two security compounds in Damascus, killing at least five people, sources in the capital said.

In regional repercussions of the increasingly sectarian Syrian conflict, four Lebanese soldiers were killed in clashes with followers of a Sunni Islamist cleric who is a critic of the role of Hezbollah - the Shi'ite Lebanese group - in giving military support to Assad.

Sources in the city said the fighting broke out when a follower of Sheikh Ahmed al-Assir was arrested at an army roadblock in Sidon, 40 km (28 miles) south of Beirut.

The clashes were followed by fighting between Hezbollah members based in the mostly Sunni city and Assir's followers in which automatic weapons and shoulder fired rockets were used, the sources said.

(Additional reporting by Laila Bassam in Beirut and Yara Bayoumy in Doha; Editing by Robin Pomeroy and Kevin Liffey)

Police remove flagpole at center of Afghan, Taliban row

Police have removed a flagpole from the Taliban's office in Qatar, an official said on Sunday, expunging the last visible sign of official decoration that riled the Afghan government and derailed nascent peace talks.

The Taliban was due to hold discussions with U.S. officials in Qatar last Thursday - originally raising hopes the meeting could develop into full-blown negotiations to end Afghanistan's 12-year-old war.

But the session was canceled when the Afghan government objected to the fanfare surrounding the militants' opening of an office in the Gulf state, complete with flag and official plaques.

Kabul said the regalia gave the mistaken impression the militants - who ruled Afghanistan until they were ousted by the U.S. offensive starting in 2001 - had achieved some measure of global recognition.

The flag and a plaque were removed late last week amid frantic diplomatic efforts to resolve the dispute. The flagpole was no longer visible at the building on Sunday.

"The Taliban's flag has been taken down from (their) office in Qatar, the banner and signboard have been removed, and the Qatar government's police have also removed the Taliban flagpole," said Masoom Stanekzai, a member of the Afghan High Peace Council, a government body set up to pursue a negotiated ceasefire with the Taliban.

His comments, released by the Afghan government, did not go into whether that meant the U.S.-Taliban talks could now continue.

TALIBAN SAYS QATAR APPROVED

The Taliban earlier on Sunday said it had erected its flag and plaques with the agreement of the Qatari government, which is hosting the talks.

The statement, issued by the Taliban's spokesman in Doha, Dr. Muhammad Naeem, did not say whether the subsequent removal of the symbols was meant as a concession to other parties in the talks. There was no comment from the Qatar government.

The news of the removal of the flagpole came a day after U.S. Secretary of State John Kerry put the onus on the Taliban to revive the talks - and warned the militants their whole office could be closed if the process collapsed.

He kept up the pressure on Sunday, telling reporters in New Delhi a final peace depended on the militants changing course and renouncing violence.

"Any political settlement must result in our judgment in the Taliban breaking ties with al Qaeda ... and accepting the Afghan constitution - including its protections for all Afghans, women and men," Kerry said.

The Afghan government repeated its complaints about the office earlier on Sunday, saying the ceremonial opening of the Taliban office had broken agreements on how the talks would proceed.

"We still need a full explanation about what happened," Said foreign ministry spokesman Janan Mosazai.

The Taliban were pushed out of power in Afghanistan by the U.S. invasion that followed the al Qaeda attacks on U.S. targets on September 11, 2001.

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The group has since waged an insurgency to overthrow the government of Afghan President Hamid Karzai and oust foreign troops.

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It has until now refused talks with Kabul, calling Karzai and his government puppets of the West.

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(Additional reporting by Lesley Wroughton in New Delhi; Writing by Dylan Welch; Editing by Clarence Fernandez and Andrew Heavens)

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Analysis: For Obama, a world of Snowden troubles

Since his first day in office, President Barack Obama's foreign policy has rested on outreach: resetting ties with Russia, building a partnership with China and offering a fresh start with antagonistic leaders from Iran to Venezuela.

But the global travels on Sunday of former National Security Agency contractor Edward Snowden highlight the limits of that approach. Leaders Obama has wooed - and met recently - were willing to snub the American president.

The cocky defiance by so-called "non-state actors" - Snowden himself and the anti-secrecy group, WikiLeaks, completes the picture of a world less willing than ever to bend to U.S. prescriptions of right and wrong.

Snowden flew out of Hong Kong, the semi-autonomous Chinese territory, early on Sunday after Hong Kong authorities rebuffed a U.S. request to detain him pending extradition to the United States for trial. Snowden has acknowledged leaking details of highly classified NSA surveillance programs.

Beijing may merely have wished to get rid of a potential irritant in its multifaceted relationship with Washington. But Snowden's next stop was Russia, a U.S. "frenemy" in which the friend factor has been harder to spot since President Vladimir Putin returned to power in May 2012.

WikiLeaks, which says it is helping the 30-year-old Snowden, said via Twitter that he intended to go to Ecuador, whose government has antagonistic relations with Washington. Ecuador's foreign minister, Ricardo Patino Aroca, said, also via Twitter, that his government had received an asylum request from Snowden.

To be sure, the U.S. government is certain to marshal all of its diplomatic, legal and political powers to return Snowden to the United States, where he is charged with offenses under the Espionage Act and with theft of government property.

The United States has revoked Snowden's passport, sources familiar with the decision said on Sunday.

But Snowden has significant levers of his own, in the form of a cache of NSA secrets of unknown size and scope.

Senator Dianne Feinstein, chairwoman of the Senate Intelligence Committee, said on Sunday that the U.S. government apparently does not know the extent of the secrets taken by Snowden, whose last job was as a systems administrator at an NSA listening post in Hawaii.

"The only thing I've learned is that he could have over 200 separate items and whether that's true or not, that's what has been relayed to me," Feinstein said on CBS "Face the Nation."

Snowden told Hong Kong's South China Morning Post on Saturday that the United States hacks into Chinese mobile phone traffic and text messaging, as well as Chinese university sites that host some of the country's major Internet hubs.

It is unclear whether such revelations played a role in Hong Kong authorities' decision to let Snowden depart, despite the U.S. request to detain him and begin extradition procedures.

Privately, U.S. officials say they believe Beijing authorities made the call to allow Snowden to leave. In doing so, the Chinese may have simply been passing along a "hot potato," that could have grown into a diplomatic spat.

"For China, this is certainly a bit of a relief. They don't want to let him stay there for a prolonged stay," said Cheng Li, an expert on Chinese politics at the Brookings Institution, a Washington think tank.

"If things get out of control (with Snowden) that will certainly undermine any achievement made in the summit in California, so China is probably very happy that Russia will be the main target," Li said, referring to the meetings between Obama and Chinese President Xi Jinping earlier this month.

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FALLOUT

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Obama, who took flak in recent months over the Internal Revenue Service targeting of conservative groups and Justice Department subpoenas of media phone calls in other leak cases, has so far not faced major criticism of his administration's handling of Snowden.

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Most U.S. lawmakers' ire has been directed at Snowden himself, as well as the systems that permitted him to get a sensitive job with contractor Booz Allen Hamilton and make away with evidence of some of the U.S. government's most shielded intelligence programs.

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But U.S. Representative Peter King, a frequent Obama critic and Republican who sits on the permanent select committee on intelligence, said the president should be more aggressive in defending the surveillance programs that U.S. officials say have thwarted terrorist attacks, and more assertive with foreign partners.

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"I find it troubling that the president has been so quiet on this. And again, I'm not saying he can control it, but there should be more of a presence including defending the NSA program," King told CNN. "It just seems as if we're adrift right now and I think that these countries are taking advantage of it.

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"This is definitely a diplomatic hit at the president, at the U.S., but as Americans we have to support the president."

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If Russia allows Snowden to continue on his journey toward Ecuador, it could wipe out what is left of Obama's policy, dating from 2009, of trying to "reset" relations with Moscow after they turned chilly under his predecessor.

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Washington and Moscow have clashed recently over Russia's human rights, adoption by Americans of Russian orphans, missile defenses and, most consequentially, the civil war in Syria.

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A photograph of Obama and Russian President Vladimir Putin at last weekend's G8 summit, their hands clasped and staring unsmilingly into space, caught the mood of U.S.-Russian relations.

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"What's infuriating here is Prime Minister Putin of Russia aiding and abetting Snowden's escape," said New York Senator Chuck Schumer, like Obama a Democrat. "The bottom line is very simple. Allies are supposed to treat each other in decent ways, and Putin always seems almost eager to put a finger in the eye of the United States, whether it is Syria, Iran, and now, of course, with Snowden."

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"That's not how allies should treat one another, and I think it will have serious consequences for the United States-Russia relationship," Schumer told CNN's "State of the Union" program.

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U.S. Senator Lindsey Graham, a South Carolina Republican, sought to keep the focus squarely on Snowden.

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"He compromised our national security program designed to find out what terrorists were up to. So, the freedom trail is not exactly China, Russia, Cuba, Venezuela," Graham told Fox News.

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"So, I hope we'll chase him to the ends of the Earth, bring him to justice and let the Russians know there will be consequences if they harbor this guy," he said.

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(Additional reporting by Mark Hosenball, Phil Stewart, Toby Zakaria and Tom Ferraro. Editing by Fred Barbash and Doina Chiacu)

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Erdogan defends riot police tactics in Turkey protests

Turkish Prime Minister Tayyip Erdogan piled ridicule on activists behind weeks of protests against his government during a rally on Sunday and defended riot police who fired water cannon at crowds in Istanbul a day earlier.

Looking out of over a sea of Turkish flags waved by his AK Party faithful in the eastern city of Erzurum, Erdogan praised his supporters and the general public for opposing what he called a plot against his country.

"The people saw this game from the start and frustrated it. They (the protesters) thought the people would say nothing. They said we will burn and destroy and do what we want but the people will do nothing," he said.

Sunday's mass rally was the fifth which Erdogan has called since protests began in Istanbul in an unprecedented challenge to his 10-year rule.

The unrest was triggered when police used force against campaigners opposed to plans to develop Istanbul's Gezi Park, but they quickly turned into a broader show of anger at what critics call Erdogan's growing authoritarianism.

The protests have underlined divisions in Turkish society between religious conservatives who form the bedrock of Erdogan's support and more liberal Turks who have swelled the ranks of demonstrators.

He ending his speech by throwing red carnations to the roughly 15,000-strong crowd in the AK Party stronghold.

MARCH ELECTIONS

The AK Party rallies are focused on boosting party support ahead of municipal elections scheduled for next March and Erdogan said voters would then give their verdict on the weeks of unrest.

"Those who came out using the excuse of Gezi at Taksim Square will get their answer at the ballot box," he said.

Erdogan, who won a third consecutive election in 2011 with 50 percent support, sees himself as a champion of democratic reform, and has been riled by the protests and by international condemnation coming mainly from key trade partner Germany.

Saturday's clashes occurred after thousands of protesters gathered in Istanbul's Taksim Square, which adjoins Gezi Park, to remember the three demonstrators and one police officer who died in earlier protests. Many refused to leave after calls from the police for them to disperse.

Erdogan defended the tactics of the police, who also used fired teargas canisters to scatter protesters in nearby streets in cat-and-mouse clashes.

"Yesterday they wanted to occupy the square again. The police were patient up to a certain point," he said. "When they didn't leave the police was forced to get them out."

There were also clashes on Saturday night in the capital Ankara, where riot police fired water cannon and teargas to break up hundreds of protesters.

The interior ministry estimates about 2.5 million people have taken part in demonstrations across Turkey since the unrest began on May 31, Milliyet newspaper reported on Sunday.

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Around 4,900 protesters have been detained and 4,000 protesters and 600 police injured, the report added.

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The interior ministry also said the protests had caused 140 million lira ($72 million) worth of damage to public buildings and vehicles.

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($1 = 1.9388 Turkish liras)

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(Writing by Daren Butler; Editing by Andrew Heavens)

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Syrian rebels renew fight for Aleppo

Syrian rebels battled President Bashar al-Assad's forces in and around the northern city of Aleppo on Sunday, seeking to reverse gains made by loyalist forces in the commercial hub over the last two months, activists said.

The fighting, by a variety of insurgent groups, happened as France urged moderate rebels to wrest territory back from radical Islamists whose role in the fight to topple Assad poses a dilemma for Western countries concerned that arms shipments could fall into the hands of people it considers terrorists.

The 11 Western and Arab countries known as the "Friends of Syria" agreed on Saturday to give urgent military support to the rebels, channeled through the Western-backed Supreme Military Council in a bid to prevent arms getting to Islamist radicals.

But radical forces showed they remained formidable on Sunday when the Islamist Ahrar al-Sham brigade detonated a car bomb at a roadblock at an entrance to Aleppo killing at least 12 loyalist soldiers, according to the opposition Aleppo News Network and other activists in the city.

Aleppo, 35 km (20 miles) south of Turkey, has been contested since July last year, when rebel brigades entered the city and captured about half of it. In recent weeks, Assad has focused his military campaign on recapturing rebel-held areas.

He has also been expanding control of the central province of Homs after capturing a strategic town on the border with Lebanon, and has used heavy bombardment and siege warfare to contain rebels dug in around the capital, according to opposition sources and diplomats monitoring the conflict.

Firas Fuleifel, with the moderate Islamist al-Farouq Brigade, said six rebel fighters were killed in fighting in Aleppo in the last day.

WIN BACK CONTROL

French President Francois Hollande, whose country has been at the forefront of Western efforts to re-organize and back the opposition, said moderate rebels must take territory held by radical Islamists whose involvement in the conflict, he said, gives Bashar al-Assad a pretext for more violence.

"The opposition needs to win back control of these areas ... they have fallen into the hands of extremists," Hollande told a news conference in the Doha a day after the Friends of Syria met in the Qatari capital.

"If it seems that extremist groups are present and tomorrow they could be the beneficiaries of a chaotic situation, it will be Bashar al-Assad who will seize on this pretext to continue the massacre," Hollande said.

In Damascus, the Ahrar al-Sham and the Islamist Tawhid al-Asima brigades detonated a car bomb in an area known as Mezze 86, inhabited by members of Assad's Alawite sect, an offshoot of Shi'ite Islam that has controlled Syria since the 1960s. Two people were killed, the Syrian Observatory for Human Rights monitoring group said.

Rebels also attacked two security compounds in Damascus, killing at least five people, sources in the capital said.

In regional repercussions of the increasingly sectarian Syrian conflict, four Lebanese soldiers were killed in clashes with followers of a Sunni Islamist cleric who is a critic of the role of Hezbollah - the Shi'ite Lebanese group - in giving military support to Assad.

Sources in the city said the fighting broke out when a follower of Sheikh Ahmed al-Assir was arrested at an army roadblock in Sidon, 40 km (28 miles) south of Beirut.

The clashes were followed by fighting between Hezbollah members based in the mostly Sunni city and Assir's followers in which automatic weapons and shoulder fired rockets were used, the sources said.

(Additional reporting by Laila Bassam in Beirut and Yara Bayoumy in Doha; Editing by Robin Pomeroy and Kevin Liffey)

Scattered, smaller protests continue in dozens of Brazilian cities

Scattered protests took place in dozens of Brazilian cities on Saturday, although fewer people took to the streets in Sao Paulo, Rio de Janeiro and Salvador, where vandalism and clashes with police have rocked the country in recent days.

Demonstrators, a mainstay outside stadiums as Brazil hosts an international soccer tournament, largely steered clear of a Brazil-Italy match in the northeastern city of Salvador - a relief for fans who have had to dodge clashes between protesters and police at several games over the past week.

But tensions flared outside another game between Mexico and Japan in the southeastern city of Belo Horizonte, where riot police fired tear gas at protesters after they overstepped a perimeter and moved toward the stadium. The game proceeded without further incidents.

Other gatherings around the country unfolded mostly peacefully, with an estimated 30,000 protesters marching on Sao Paulo's main avenue against a bill in Congress that would limit the power of public prosecutors to investigate corruption and other crimes.

In the capital, Brasilia, about 4,000 people joined what they called a "sluts' parade" for women's rights, while a smaller group gathered to protest against the use of taxpayer money to build stadiums for next year's soccer World Cup, which Brazil will host.

The protests that swept Brazil over the past week have seemingly come out of nowhere, with more than a million people taking to the streets on Thursday to air a wide range of grievances, from poor public transport and hospitals to corruption and shoddy, underfunded schools.

The demonstrations, the biggest in Brazil in two decades, have attracted a mostly younger crowd of students and a middle class fed up with politics as usual. Many of the marches have been non-violent, often carnival-like events, though some have been marred by vandalism and looting, fueling a backlash among many Brazilians.

The protests have become a major headache for Brazilian politicians, including President Dilma Rousseff. In a televised address on Friday night, Rousseff expressed support for the protests while pledging to curb violence and looting. She also appealed for Brazilians to be "generous hosts" to the hundreds of thousands of tourists expected for the World Cup.

SIGNS OF FATIGUE

Rousseff, herself a former leftist guerrilla who was jailed in her youth for conspiring against Brazil's military dictatorship, also sought to address public outrage against taxpayers' money being spent on stadiums instead of hospitals and schools, vowing that every cent would be repaid over time.

That didn't stop an estimated 66,000 people from marching through the streets of Belo Horizonte against the World Cup on Saturday. Other demonstrations were smaller, perhaps in a sign of what some here have described as protest fatigue after a week of relentless marches that have made daily life in Brazilian cities a logistical nightmare.

The protests began two weeks ago with small but disruptive marches in a handful of cities against an increase in bus and subway fares. After a heavy-handed police response in Sao Paulo brought more Brazilians into the streets, the protests embraced a litany of causes, including a so-called "gay cure" bill that would allow psychologists to treat homosexuality as a disorder.

In Rio de Janeiro, where some 300,000 people marched on Thursday in the city's largest demonstration yet, only a handful of protesters gathered on Saturday. Some were outside the residence of state governor Sergio Cabral in the upscale, beachfront neighborhood of Leblon.

Some protesters clashed with police in Salvador on Saturday, but the incidents took place some distance from the arena where Brazil's national soccer team defeated Italy 4-2 in front of a capacity crowd in a Confederations Cup game.

"Today it's only happiness, no violence," said Geovani dos Santos, a lawyer who attended the game with his wife and daughter. "The soccer team is a source of pride."

(Writing by Walter Brandimarte and Todd Benson; editing by Christopher Wilson)

Analysis: Another China central bank worry; companies push into lending

Chinese companies are getting more creative in the business of money lending as they struggle to keep profits ticking over in a cooling economy, raising concerns they are adding to the mountain of debt risks building in the world's No.2 economy.

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Big state companies in industries struggling with over-capacity but with easy access to credit are borrowing funds, not to invest in their business but to lend to smaller firms sometimes at several times the official interest rate, part of an informal lending market in China that authorities are taking aim at.

China's central bank increased pressure on banks to rein in such informal lending and speculative trading last week in money markets, letting short-term interest rates spike to extraordinary levels.

In the $3.7 trillion so-called shadow banking market, the fastest growing area is in so-called entrusted loans, which are arranged by banks on the companies' behalf, and in bankers' acceptance notes, tradable securities that give a steady flow of cash.

Issuance of entrusted loans and bankers' acceptance notes has more than doubled to 1.6 trillion yuan ($261 billion) in the first four months of this year from 636 billion yuan a year ago.

"Can we use the money to expand production? Definitely not," said a deputy general manager at a state-owned steel firm in the eastern Shandong province, speaking on condition of anonymity.

"We will lose more if we produce more. We can only rely on other channels," he added, noting the firm loses an average 100-200 yuan per metric ton (1.1023 tons) of steel sold.

China's economic growth is widely expected to slow further in the current quarter as exporters struggle with weak global markets, making lending money an increasingly attractive business option.

But there are concerns that some of the money is going into areas the government would rather it did not, for example real estate speculation, raising the risk of it turning bad while not helping the economy out of its current slowdown.

Indeed, debt is shaping up to be China's biggest financial problem. The cabinet has said it would control the flow of new money into industries struggling with overcapacity.

Beijing worries the shadow banking market is creating asset-price bubbles, and the central bank has tried to put a barrier in the way of it in recent weeks by declining to inject major funds into money markets.

The shadow banking system has arisen because main stream banking is focused on the needs of big state-owned enterprises.

Ratings agency S&P has estimated that outstanding shadow banking credit totaled $3.7 trillion by the end of 2012, equal to 44 percent of GDP.

Fitch has put it at about 60 percent, saying "torrid growth" has made the total of all forms of credit, including regular lending, shadow and hidden underground lending, as much as 200 percent of GDP.

"This is a very, very big problem for the economy," said Wei Yao, China economist at Societe Generale in Hong Kong.

"The existence of all these arbitrage efforts shows that in the real economy, there are few opportunities. You've limited all the opportunities for real growth, then you open a window in the financial markets; of course everyone goes there!"

NEW TECHNIQUES

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With entrusted loans, a company provides the funds but, to circumvent a ban on direct lending to other firms, it designates a commercial bank to lend the money to a specific borrower.

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The lender stipulates the amount, tenor, and rate of the loan, while the banks earn fees from both sides without the loans showing up on their balance sheets.

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The average monthly amount of new entrusted loans was 179 billion yuan in the first four months of 2013, up from an average of 106 billion yuan a month last year.

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The steel company manager said he borrows from banks around the 6 percent official rate, then issues an entrusted loan to a borrower at up to twice that rate.

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The general manager of a local government-controlled glass company in the northern province of Hebei said his company has increased the use of such practices as business slowed, lending about 30 to 40 million yuan so far this year at around 6 to 7 percent mainly to related firms.

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Some private companies are also cashing in. Zhejiang Longsheng Group Co Ltd, a specialty chemicals maker based near Shanghai, detailed 50 entrusted loans worth 3 billion yuan outstanding in its 2012 annual report.

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The company lent to subsidiaries at rates of 6 to 7 percent, but unrelated companies were charged as much as 25 percent. It said one of the loans, with a rate of 20 percent, would be rolled over as the borrower had difficulty repaying it.

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Companies are also buying bank acceptance notes, transferable bills issued by other banks that can be sold for cash. These companies sell the bills and use part of the cash raised to make loans and the rest to buy more bills, thus ensuring a continuous churn of funds and income.

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The average monthly amount of bank acceptance bills issued so far this year has more than doubled to 222.8 billion yuan compared with an average of 87.5 billion yuan for all of 2012.

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REAL ESTATE A WORRY

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A chief worry is that the newly generated money is finding its way into speculative real estate, complicating China's three-year fight against a property bubble. New home prices in May rose from a year earlier at their fastest pace in more than two years.

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An official at the statistics department of the central bank's Dalian office, who asked not to be identified, said that among all the entrusted loans issued in 2012 in the northeastern city, about 30 percent went to the real estate sector at an average interest rate of 12 percent.

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Another official at the central bank's Chongqing office said finance companies and credit guarantee firms affiliated to state-owned enterprises are major issuers of such loans.

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"In our city, there is an estimated 50 percent or more of such loans flowing into the property sector and local government financing vehicles," said the official. "The injection of entrusted loans partially helps pull down the bad loan ratio in the property sector and local financing firms, but the risks keep brewing there and could become acute if the economy slows further."

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($1=6.1282 yuan)

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(Reporting by Aileen Wang, Lu Jianxin and Pete Sweeney: Editing by Jonathan Standing, Vidya Ranganathan and Neil Fullick)

When the Ben and Beijing party comes to an end

Through the dark days of the financial crisis, and the grey days of the halting recovery that have followed, investors have always been able to count on backing from two sources - Ben Bernanke and Beijing.

They have provided stimulus, mainly by pumping funds into the U.S. and Chinese economies in various ways, when other pillars of support had become unreliable.

That helps to explain why global financial markets took such a beating last week when both signaled that they are getting tired of being leant on so heavily.

Bernanke, the chairman of the U.S. Federal Reserve, set a timetable at last week's Fed meeting for the central bank to reduce the size of its bond buying program with a view to ending it by the middle of next year.

Meanwhile, his counterparts at the People's Bank of China (PBOC) engineered a cash crunch as a warning to overextended banks - and this from a central bank that has previously always provided liquidity when cash conditions tightened.

A lot will now depend on whether this kind of behavior from either hurts the global economy enough to seriously damage the confidence of businesses and consumers, with the resulting fallout for spending, corporate profits, and hiring.

"A trading environment once predicated on free money forever is now being reassessed," said Eric Green, TD Securities' global head of rates research, in a note to clients. The prospects of the Fed stopping its easy money policies "leaves few willing buyers to step in" as prices drop, he said.

In China, a sudden leap in rates for short-term borrowing to record highs should help rein in so-called shadow banking, the lending being done by non-bank institutions, but there is the risk of a miscalculation that could set off a full-blown banking crisis even as the economy is showing fresh signs of slowing.

"It does create a lot of repayment risk within the system between financial institutions and there is potential for unintended consequences," said Charlene Chu, senior director at Fitch Ratings.

BULLARD'S WARNING

A possible miscalculation is also the concern of St. Louis Federal Reserve President James Bullard, who complained that Bernanke spoke too soon about reducing stimulus last week.

Neither the central bank's own economic growth forecasts nor its expectations for continued weak inflation supported a decision just yet to dial back on the $85 billion a month it has been pumping into the financial system, the St. Louis Fed said in explaining Bullard's thinking.

Bullard, who dissented against the decision, wanted "a more prudent approach," that would have meant waiting for clearer signs that weak inflation would rebound.

While Bernanke made it clear that the Fed's actions would depend on whether the economy continues to improve, he based his forecast on expectations that growth will be buoyant enough to bring the U.S. jobless rate down to near 7 percent in a year's time from its current rate of 7.6 percent.

Investors had known the central bank was starting to consider less accommodation, but the level of detail surprised them. So did the return of the Fed to calendar-based guidance on what it intended to do, after months of attempts by Bernanke and other top officials to tie the bond buying, known as quantitative easing, to the economy's performance.

"The average investor is just so dependent on quantitative easing to act as that safety net that, even though it was forewarned, it still came as a shock," said Bruce Bittles, chief investment strategist for brokerage Robert W. Baird & Co.

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The big problem is that there isn't much precedent for normalizing an economy that has been artificially supported for so long with low interest rates and a massive injection of funds through bond buying. To say the punch bowl is being removed may be an understatement.

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The risk is that there are more major disruptions in financial markets in the next few months as investors pull back for fear of the unknown - and that rising interest rates and a decline in the value of stocks and bonds starts to feed into the real economy as consumers and companies cut back spending.

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That could stall the housing market recovery and reduce expectations for retail sales and capital investment, which would quickly feed into lower corporate earnings growth and weaker job creation.

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To be sure, on housing and the economy, Bernanke was hopeful last week - saying that people "expect house prices to continue to rise" - and stressing that when interest rates rise for the right reasons, including optimism about the economy, it is "a good thing."

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And his credibility remains intact with many.

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Bernanke "did a very good job of structuring the runway, saying this is how it's likely to unfold," said William Larkin, fixed income portfolio manager at Salem, Massachusetts-based Cabot Money Management, which has $500 million in assets.

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Investors are almost evenly split on whether the Fed will be able to manage the transition to higher rates without doing serious harm to the economy, according to the Wells Fargo/Gallup Investor and Retirement Optimism Index, released on Thursday. Forty-six percent of those surveyed said the Fed will be successful, while 43 percent said the economy will suffer great harm when policy changes.

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JPMorgan chief U.S. economist Michael Feroli said he mostly expects economic data to play out as the Fed predicts.

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"Were the economy to stumble, however, history may look back on this meeting as one where the Fed once again jumped the gun in embracing better data," he said.

_9">

Given such uncertainty for global markets, the last thing that was needed last week was concern about stability in the Chinese banking system.

_10">

The PBOC let short-term interest rates spike to extraordinary levels - the cost of borrowing overnight funds surged to as high as 25 percent for some institutions at one stage - as it refused to inject funds into money markets.

_11">

The jitters spread more broadly late last week, amid rumors - passed on by Chinese media outlets - that two major banks had received emergency funds from the PBOC circulated in financial markets in London and New York on Thursday. The lenders denied the rumors, after which money markets calmed somewhat on Friday.

_12">

But the episode has added to some wider concerns among investors that the Chinese economy is over-extended, with overall financing rising 52 percent in the first five months of this year compared with the same period in 2012. Of particular concern are big sales of wealth management products that promise investors high returns.

_13">

The negative sentiment was reflected in a front-page article in the U.S. financial weekly Barron's this weekend. The headline screamed "China's Looming Credit Crisis" as it spotlighted what it said was reckless borrowing by Chinese companies and local governments.

_14">

Given the growing importance in recent years of an earnings stream from China for many large American and European companies any stumble by China could have wider ramifications.

_15">

For the current quarter, earnings for companies in the Standard & Poor's 500 index are expected to rise by just 3.2 percent, though they are seen rebounding back above 13 percent for the fourth quarter despite forecasts for negligible sales growth.

_0">

However, there are plenty of warning signs. In the run up to the quarterly reporting period, which starts next month, the number of firms in the index lowering their earnings forecasts is outnumbering those raising them by 6.5 to 1 - the weakest outlook ratio since 2001, according to Thomson Reuters data.

_1">

On Friday, for example, one of the country's biggest restaurant operators, Darden Restaurants Inc, said higher payroll taxes and gasoline prices were cutting into traffic at its eateries, which include two destinations for the middle class, the Olive Garden and Red Lobster chains.

_2">

And while FedEx Corp reported a higher-than-expected quarterly profit on Wednesday, it did so by cutting costs. The company, considered an economic bellwether because of the massive volume of goods it moves around the world, is cutting costs and jobs to adjust to higher demand for less expensive international shipping.

_3">

Many companies are finding it difficult to raise prices in the current environment, which can hurt their margins, and reflecting Bullard's concerns about the inflation rate being too low.

_4">

And even those who are relatively bullish in one market or another are keeping their expectations very much in check.

_5">

"'Down a little' is the new ‘up,' for now anyway," said Doubleline Capital's CEO Jeffrey Gundlach, who is bullish on Treasuries despite last week's worst sell-off in the benchmark 10-year market in more than a decade.

_6">

(Additional reporting by Ann Saphir and Dan Burns; Editing by Martin Howell & Kim Coghill)

_7">

Analysis: Electing the EU Commission chief - a dumb bright idea?

It seemed like a bright idea at the time.

By linking the choice of president of the executive European Commission to the European Parliament elections in the 2009 Lisbon Treaty, EU leaders hoped to reverse rising abstentionism and overcome Europe's widely bemoaned "democratic deficit".

If voters around the soon-to-be-28-nation European Union were given a real policy choice personified by a single candidate, they would identify more easily with "Europe" and vote in greater numbers, the theory went.

That in turn would give greater legitimacy to the European Commission, which proposes and enforces EU laws but which critics often denigrate as unelected and undemocratic.

"For the first time these could be genuine 'European' elections, the outcome of which will shape European politics for at least the next five years," said Simon Hix, professor of European governance at the London School of Economics.

"It will be the first time we, as European citizens, can choose who holds the most powerful executive office in the EU."

Well maybe, but maybe not.

With less than a year to go until the May vote, the pitfalls of the new system are becoming clear as Europe seeks a successor to Jose Manuel Barroso, the center-right former Portuguese Prime Minister who has been in the hot seat since 2005.

For one thing, an election traditionally used to register a protest vote against national governments may for the first time be used to deliver an almighty kicking to Europe itself.

EU leaders are anxious at the prospect of an unprecedented wave of Euroskeptical lawmakers being swept into the unloved parliament on a tide of anger over mass unemployment, economic stagnation and austerity measures.

As Mark Leonard and Jose Ignacio Torreblanca of the European Council on Foreign Relations argued in a paper on the rise of continental Euroskepticism, many voters feel the EU's increasing dominance of national economic policy in the crisis means they can change government but they can't change policy any more.

"To an increasing number of citizens in southern European countries, the EU looks like the International Monetary Fund did in Latin America: a golden straitjacket that is squeezing the space for national politics and emptying their national democracies of content," they wrote.

In countries such as France, Britain, Italy, Greece and the Netherlands, opinion polls suggest as much as a third of the vote may go to anti-EU populists and parties of the nationalist far right or the hard left.

That could make it harder to assemble an absolute majority to elect the next Commission president, who will be proposed by EU leaders "taking into account the elections to the European Parliament and after having held the appropriate consultations".

It may also be deterring top talents from seeking the job. So far, there is little sign of A-list European leaders stepping forward to vie for their political family's nomination.

Three prime ministers seen as potential candidates for the center-right European People's Party, the biggest bloc in the current EU legislature, have taken themselves out of the race.

_0">

Donald Tusk of Poland, Jyrki Katainen of Finland and Fredrik Reinfeldt of Sweden all opted to stay in national politics.

_1">

One serving national leader, speaking on condition of anonymity, outlined why the new system makes it unattractive for incumbents to seek the Commission presidency.

_2">

"I imagine the parties will decide on their candidates in January/February. What happens if the candidate is a prime minister? Can he go on running his country as normal while waging a Europe-wide campaign?" he asked.

_3">

"What happens then if his party is not the biggest? Can he simply carry on as prime minister?"

_4">

That may leave Europe's largest political family having to nominate a second-ranking figure as its candidate.

_5">

Among those mentioned are two serving European commissioners - Viviane Reding of Luxembourg and Michel Barnier of France - and one former member, Lithuanian President Dalia Grybauskaite. None is a crowd-pulling household name.

_6">

One big name touted by some is International Monetary Fund chief Christine Lagarde, a French conservative. But it's not clear that a Socialist French government would nominate her and she is involved in a legal case that may cloud her future.

_7">

The Socialists, the second biggest grouping, seem likely to make European Parliament President Martin Schulz, 57, a German Social Democrat, their champion. Schulz has been campaigning for months and no serious rival has arisen so far.

_8">

But while the bearded former bookshop owner is a familiar figure in Brussels, having spent almost his entire political career in the EU legislature, he lacks government or economic experience.

_9">

Not widely known even at home, his main claim to fame was a public clash in 2003 with then Italian Prime Minister Silvio Berlusconi, who caused offence by comparing him to a Nazi concentration camp "kapo".

_10">

Although Schulz speaks fluent French and English, his nationality may be a handicap with voters in France, Britain and the peripheral countries of the euro zone, where Germany is associated with harsh austerity policies.

_11">

If the German Social Democrats end up in a grand coalition with Chancellor Angela Merkel's conservatives after a September general election, it will be hard for Schulz to campaign as an alternative to her policies. f Merkel's center-right coalition is re-elected, Berlin may not wish to nominate him as its candidate for the European Commission, barring his path.

_12">

Other Socialist names whispered in the corridors include outgoing World Trade Organisation chief Pascal Lamy and former Spanish Prime Minister Jose Luis Rodriguez Zapatero. Neither seems likely to be nominated.

_13">

The center-right liberals, the third largest parliamentary group, seem set to pick former Belgian Prime Minister Guy Verhofstadt, 60, whose Franco-German-backed bid to be Commission president in 2004 was torpedoed by Britain and its allies. Many EU governments see him as too much of a federalist.

_14">

The Greens are to hold an online ballot to pick a standard-bearer, having lost their most charismatic leader, Daniel Cohn-Bendit, 67, who is standing down from the European Parliament.

_15">

One intriguing outsider whose name is on many lips is former Italian Prime Minister Mario Monti, 70, the ultimate EU insider.

_0">

A respected economist who has been European commissioner for competition and the internal market, Monti led a technocratic government that pulled Italy back from the brink of collapse in 2011. He enacted some tough reforms and austerity measures but was heavily defeated in a general election in February.

_1">

Moreover, his centrist Civic Choice party is not a member of any EU political family, and Berlusconi, who toppled his government, might try to block an EPP move to draft him.

_2">

So while the notion of introducing more democracy into the choice of the European Commission chief was seductive, it may turn out to be what the French call "une fause bonne idee" - a dumb bright idea.

_3">

(Writing by Paul Taylor; editing by Ron Askew)

_4">

White House expects Russia to look at all options to expel Snowden back to U.S.

The White House on Monday said it expects the Russian government to "look at all options available" to expel former government contractor Edward Snowden back to the United States to face espionage charges.

_0">

The White House National Security Council spokeswoman Caitlin Hayden said the United States also registered strong objections to authorities in Hong Kong and China through diplomatic channels at the decision to let Snowden flee.

And "noted that such behavior is detrimental to U.S.-Hong Kong and U.S.-China bilateral relations," Hayden said.

(Reporting by Steve Holland; Editing by Stacey Joyce)

South Africans resigned over 'critical' Mandela

South Africans adopted a mood of sombre resignation on Monday to the inevitability of saying goodbye to former president Nelson Mandela after the 94-year-old anti-apartheid leader's condition in hospital deteriorated to critical.

Madiba, as he is affectionately known, is revered among most of South Africa's 53 million people as the architect of the 1994 transition to multi-racial democracy after three centuries of white domination.

However, his latest hospitalization - his fourth in six months - has reinforced a realization that the father of the post-apartheid "Rainbow Nation" will not be around for ever.

President Jacob Zuma, who visited Mandela late on Sunday with African National Congress (ANC) Deputy President Cyril Ramaphosa, reflected the national mood when he told a news conference that Mandela remained critical.

"All of us in the country must accept that Madiba is now old. As he ages, his health will trouble him," Zuma said, declining to give specific details about Mandela's medical condition or other information from his hospital visit.

"Given the hour, he was already asleep. We saw him, looked at him and then we had a bit of a discussion with the doctors and his wife," Zuma said. "I don't think I'm a position to give further details. I'm not a doctor."

U.S. President Barack Obama is due to visit South Africa this week as part of a three-country Africa tour but Zuma said Mandela's worsening state of health should not affect the trip.

"Nothing is going to stop the visit because Madiba is sick," Zuma said.

Mandela's daughter Makaziwe said the family was taking each day as it came and enjoying as much time as possible with a man who, to them, is simply a father, grandfather or great-grandfather.

"He is at peace with himself," she told CNN. "He has given so much to the world. I believe he is at peace."

"WE WILL MISS HIM"

Mandela's deterioration this weekend, two weeks after being admitted in a serious but stable condition with a lung infection, has caused a perceptible switch in mood from prayers for recovery to preparations for a fond farewell.

"If it's his time to go, he can go. I wish God can look after him," said nurse Petunia Mafuyeka, as she headed to work in Johannesburg.

"We will miss him very much. He fought for us to give us freedom. We will remember him every day. When he goes I will cry."

There was some concern among the public about doctors trying to prolong the life of South Africa's first black president, one of the 20th Century's most influential figures.

"I'm worried that they're keeping him alive. I feel they should let him go," said Doris Lekalakala, a claims manager. "The man is old. Let nature take its course. He must just rest."

_0">

Since stepping down in 1999 after one term as president, Mandela has stayed out of active politics in a country with the continent's biggest and most important economy. His passing is expected to have little political impact.

_1">

His last public appearance was waving to fans from the back of a golf cart before the final of the soccer World Cup in Johannesburg's Soccer City stadium in July 2010.

_2">

During his retirement, he has divided his time between his home in the wealthy Johannesburg suburb of Houghton, and Qunu, the village in the poor Eastern Cape province where he was born.

_3">

The public's last glimpse of him was a brief clip aired by state television in April during a visit to his home by Zuma and other senior ANC officials.

_4">

At the time, the 101-year-old liberation movement, which led the fight against white-minority rule, assured the public Mandela was "in good shape", although the footage showed a thin and frail old man sitting expressionless in an armchair.

_5">

(Additional reporting by Pascal Fletcher; Writing by Ed Cropley; Editing by Pascal Fletcher and Alison Williams)

_6">

Softbank closer to acquiring Sprint after Dish abandons bid for now

Japan's SoftBank Corp ( id="symbol_9984.T_0">9984.T) cleared a major hurdle in its attempt to buy U.S. wireless provider Sprint Nextel Corp ( id="symbol_S.NS.N), as rival bidder Dish Network Corp ( id="symbol_DISH.ODISH.O) declined to make a new offer after SoftBank sweetened its own bid last week.

_1">

SoftBank Chief Executive Masayoshi Son is now a step closer to sealing the largest overseas acquisition by a Japanese company in history, after winning support from a key shareholder by raising SoftBank's offer to $21.6 billion from $20.1 billion last week.

_2">

Son, a rare risk-taker in a cautious Japanese corporate environment, has been determined to thwart a rival bid from Dish - led by Chairman Charlie Ergen, known for aggressive takeover attempts - in an effort to break into the U.S. market.

"We look forward to receiving the FCC (Federal Communications Commission) and shareholder approvals which will allow us to close in early July and begin the hard work of building the new Sprint into a meaningful 3rd competitor in the US market," Softbank said in a statement.

SoftBank, one of Japan's top mobile operators, has promised that Sprint would be able to save money on equipment such as smartphones by getting bulk-buy discounts from vendors. It can also lend its expertise in wireless technology, an area in which Son has said Dish's Ergen has no experience.

"The advantage of SoftBank is really about the synergy between the two firms ... in terms of distribution, branding and retailing," said Hiroshi Yamashina, a senior telecommunications analyst at BNP Paribas in Tokyo.

Dish's promise was additional wireless spectrum that it has bought in recent years as well as the opportunity to expand its video services to cellphone users.

Shares of SoftBank rose 4.2 percent in Tokyo, outpacing a 1.8 percent rise in the benchmark Nikkei .N225 average.

CLEARWIRE BATTLE

Satellite TV provider Dish said it was unable to meet Sprint's deadline because of changes the wireless company made in its agreement with SoftBank, such as higher break-up fees that raised the hurdles for a Dish deal. However, the company said it was still considering its options and "continues to see the value in a merger with Sprint."

Dish said it would now focus on its tender offer for Clearwire Corp CLWR.O, threatening to disrupt Sprint's own takeover bid for the broadband provider. Sprint needs Clearwire's valuable wireless airwaves for its planned high-speed network upgrades.

Clearwire's board recommended last week that its shareholders vote against Sprint's $3.40 per share offer at a June 24 meeting and instead urged them to accept Dish's tender offer to buy Clearwire shares for $4.40 each.

Sprint has filed a lawsuit against Dish and Clearwire over the Dish offer and Clearwire's recommendation. {ID:nL2N0ET1SL]

"Because Sprint owns a 51 percent stake in Clearwire, it's hard to see how Dish's proposal could get through in the shareholders' meeting," said Tetsuro Tsusaka, a telecommunications analyst at Morgan Stanley MUFG in Tokyo.

Some analysts have said that if Dish fails to win Sprint, it could use a minority ownership of Clearwire as a bargaining chip to help it forge an agreement with SoftBank either to buy spectrum or to create a network partnership.

While SoftBank has said that it would be happy for Sprint to just own a majority stake in Clearwire, it would forgo savings and some control if Clearwire retains independence with a separate board and network.

_0">

U.S. SPRINGBOARD

_1">

Son has pursued his quest of becoming the top mobile provider in Japan with a clutch of acquisitions, including Vodafone's ailing Japan arm in 2006. He now sees Sprint as a springboard into the United States, where the two most dominant players are Verizon Communications Inc ( id="symbol_VZ.N_5">VZ.N) and AT&T Inc ( id="symbol_T.N_6">T.N). SoftBank and Sprint are currently both ranked third in their respective countries.

_2">

"I am determined to be No. 1 in the world very soon in our own industry. You are lucky not to be my competitor," he told a consumer goods conference in Tokyo on June 14.

_3">

SoftBank was forced to raise its bid for Sprint on June 10 after Sprint shareholders said they preferred Dish's offer. It promised to pay shareholders $7.65 a share, up from the previous offer of $7.30.

_4">

The revised deal would give SoftBank 78 percent ownership of Sprint compared with a 70 percent stake under its earlier offer. However, the deal provides $3 billion less direct capital investment in Sprint itself than the previous offer.

_5">

"Perhaps the reason Sprint didn't care so much about a smaller capital injection is that they really have the conviction that their cash flow will be improved enough by the deal," said Yamashina of BNP Paribas.

_6">

"If SoftBank hadn't bumped up the shareholder part, there was a chance they wouldn't have been able to please shareholders like Paulson."

_7">

Paulson & Co, Sprint's second-biggest shareholder, has already said it would vote for the latest SoftBank deal but other Sprint shareholders have said they wanted to hear Ergen's response before making a decision on the latest bid.

_8">

Sprint shares fell 11 cents, or 1.5 percent, to $7.21 in after-hours trading, suggesting that at least some shareholders appeared to lose hope for a higher bid after Dish's statement.

_9">

Sprint declined to comment on the Dish statement.

_10">

(Additional reporting by Greg Roumeliotis, and Jonathan Stempel in New York; Editing by Bernard Orr, Diane Craft and Chris Gallagher)

_11">

(This story is refiled to correct to state SoftBank would be happy with a Sprint majority stake in Clearwire, not minority stake in 15th paragraph) )

_12">

Apple warns of "chilling effect" as antitrust trial ends

Apple Inc, on trial for allegedly colluding to raise the price of e-books, said on Thursday an adverse ruling would have a "chilling effect" on how businesses investigate new markets.

If Apple was found guilty, it would "send shudders through the business community" by condemning the ordinary negotiations that companies undertake to enter new markets, the company's lawyer, Orin Snyder, said on the last day of the trial.

"We submit a ruling against Apple on this record sets a dangerous precedent," Snyder said.

The U.S. Justice Department accuses Apple of conspiring with U.S. publishers beginning in late 2009 to increase the price of e-books in an effort to undercut the pricing established by then-dominant Amazon.com Inc. The publishers have settled with the government.

Throughout closing arguments Thursday, Apple found itself fighting back against tough questioning by U.S. District Judge Denise Cote.

At one point on Thursday, Cote asked if it was correct that Apple "understood publishers were willing to work together to put pressure on Amazon."

Snyder responded there was no evidence Apple understood the publishers were allegedly conspiring together before it proposed creating an online bookstore for its coming iPad. Apple had no idea the publishing executives were calling each other and having dinners together.

"There is no such thing as a conspiracy by telepathy," Snyder said.

For three weeks, the government has sought to show the popular iPad maker conspired with five of the biggest publishers to raise prices for new and bestselling books from the $9.99 set by Amazon.com.

Amazon.com, which at the time controlled up to 90 percent of the e-book market, had been buying books at wholesale and then selling them at times below its costs as it promoted its Kindle reading device.

Apple, by contrast, entered into so-called agency agreements in which publishers rather than Apple set book prices of up to $12.99 and $14.99, in a move the government contends enabled publishers to push back against Amazon.com's pricing.

Apple in exchange got a 30 percent commission from the publishers, who included Pearson Plc's Penguin Group, News Corp's HarperCollins Publishers Inc, CBS Corp's Simon & Schuster Inc, Lagardere SCA's Hachette Book Group Inc and Verlagsgruppe Georg von Holtzbrinck GmbH's Macmillan.

After signing the deals, the government said publishers pushed Amazon.com into the agency model, allowing publishers to increase prices, which shot up 9 percent industrywide, Mark Ryan, a Justice Department lawyer, said.

"Only a united industry front could move Amazon off its $9.99 price," he said.

Cote, who has said before the trial began that she thought the government would be able to show direct evidence Apple engaged in the conspiracy, also interrupted Ryan as he made his closing argument.

At one point, she asked Ryan how he responded to Apple's "argument that it didn't raise prices as the e-books would have been unavailable at any price."

_0">

Earlier Thursday, Snyder had argued that before Apple entered the market, publishers had begun withholding popular new titles from e-bookstores until the hardback version had been on sale for a number of weeks. Without Apple's entry, those titles would not have been available as e-books immediately, he said.

_1">

Ryan, who had earlier shown statistics that publishers withheld titles just 37 times in 2009, said he rejected Apple's argument. It was unclear how the future would have played out, he said.

_2">

"We don't know what course competition would have taken the industry on," Ryan said.

_3">

The Justice Department is not seeking damages against Apple. In a slide presented Thursday, the Justice Department said it wanted Apple to be prohibited from the agency model for two years and a five-year prohibition against the use of price-parity contract clauses at the center of the case, among other remedies.

_4">

Should the government prevail, a separate trial would be held on damage claims asserted by 33 state attorneys general whose case on liability was also being heard during the last few weeks.

_5">

The case is United States v. Apple Inc et al, U.S. District Court, Southern District of New York, No. 12-02826.

_6">

(Reporting by Nate Raymond; Editing by Phil Berlowitz)

_7">

Sprint raises Clearwire bid, wins key investor support

Sprint Nextel Corp raised its buyout offer for Clearwire Corp to $5 per share on Thursday and announced support from a key group of dissident shareholders, likely ending a bitter battle with rival suitor Dish Network Corp.

Sprint, currently Clearwire's majority shareholder, has been fighting publicly with Dish over Clearwire since January as both companies want Clearwire's vast trove of valuable wireless airwaves to help them compete in wireless services.

Clearwire put its support behind the latest offer, representing the second major blow in a matter of days against Dish Chairman and founder Charlie Ergen, who wants to expand his satellite TV company into the wireless market.

Earlier this week Ergen had to back out, at least for now, from a battle with Japan's SoftBank Corp to buy Sprint itself.

Dish declined comment on the new Clearwire offer.

Several analysts said they now expect Sprint to prevail.

"We believe Clearwire shareholders will approve the $5 offer from Sprint regardless of any new overtures from Dish," said BTIG analyst Walter Piecyk.

On top of the higher price, which gives Clearwire an enterprise value of more than $14 billion - or a roughly 14 percent premium over Dish's bid, Sprint also had Clearwire change its governance rules making it harder for a rival bidder.

The changes include a break-up fee of $115 million that Clearwire would have to pay if the latest deal fails.

Clearwire shares closed up 34 cents, or 7 percent, at $5.04 on Nasdaq. Sprint shares rose 7 cents, or 1 percent, to $7.07 on the New York Stock Exchange.

MONTHS OF PRESSURE, INTENSE NEGOTIATIONS

The improved offer was the result of months of pressure from Clearwire shareholders as well as two rival bids from Dish, which first offered $3.30 per share for Clearwire in January.

Clearwire had recommended last week that shareholders accept Dish's more recent $4.40 per share offer for their shares and vote against Sprint's May offer of $3.40 per share.

Sprint said it now has support from shareholders with 45 percent of Clearwire's minority shares, just shy of the more than 50 percent it needs to take over the company.

For example, it said it has commitments from a group of four activist shareholders that own about 9 percent of Clearwire's voting shares to support the deal.

Clearwire Chief Executive Erik Prusch said he was confident the deal can win over enough shareholders.

_0">

"That's completely different to where we were a short time ago," said Prusch who said the offer ended several days of intense negotiations between Sprint and Clearwire. Clearwire's efforts were led by Dennis Hersch, the head of its special committee, and John Stanton, Clearwire's chairman.

_1">

"The difference with this is that it comes with the validation of a group of our minority shareholders," Prusch said.

_2">

The group of four shareholders - Mount Kellett Capital Management LP, Glenview Capital Management LLC, Chesapeake Partners Management Co, Inc and Highside Capital Management LP - had publicly complained about Sprint's offer priced and teamed up to negotiate for a higher price.

_3">

The latest offer was the third time Sprint raised its bid since its first December offer to buy Clearwire's minority shares for $2.90 each.

_4">

The latest Sprint offer came just days before Clearwire shareholders were expected to vote down its previous $3.40 per share offer.

_5">

Clearwire postponed a June 24 shareholder vote until July 8 to give shareholders time to review the new offer.

_6">

Shareholders had complained that Sprint's previous offer was too low even before Dish made its counterbid at the end of May. Analysts and investors told Reuters that Sprint would need to raise its bid or risk a contentious relationship with Dish as a minority shareholder.

_7">

(Reporting by Sinead Carew; Editing by Gerald E. McCormick, Richard Chang and Bernard Orr)

_8">

Sprint raises Clearwire bid, wins key investor support

Sprint Nextel Corp raised its buyout offer for Clearwire Corp to $5 per share on Thursday and announced support from a key group of dissident shareholders, likely ending a bitter battle with rival suitor Dish Network Corp.

Sprint, currently Clearwire's majority shareholder, has been fighting publicly with Dish over Clearwire since January as both companies want Clearwire's vast trove of valuable wireless airwaves to help them compete in wireless services.

Clearwire put its support behind the latest offer, representing the second major blow in a matter of days against Dish Chairman and founder Charlie Ergen, who wants to expand his satellite TV company into the wireless market.

Earlier this week Ergen had to back out, at least for now, from a battle with Japan's SoftBank Corp to buy Sprint itself.

Dish declined comment on the new Clearwire offer.

Several analysts said they now expect Sprint to prevail.

"We believe Clearwire shareholders will approve the $5 offer from Sprint regardless of any new overtures from Dish," said BTIG analyst Walter Piecyk.

On top of the higher price, which gives Clearwire an enterprise value of more than $14 billion - or a roughly 14 percent premium over Dish's bid, Sprint also had Clearwire change its governance rules making it harder for a rival bidder.

The changes include a break-up fee of $115 million that Clearwire would have to pay if the latest deal fails.

Clearwire shares closed up 34 cents, or 7 percent, at $5.04 on Nasdaq. Sprint shares rose 7 cents, or 1 percent, to $7.07 on the New York Stock Exchange.

MONTHS OF PRESSURE, INTENSE NEGOTIATIONS

The improved offer was the result of months of pressure from Clearwire shareholders as well as two rival bids from Dish, which first offered $3.30 per share for Clearwire in January.

Clearwire had recommended last week that shareholders accept Dish's more recent $4.40 per share offer for their shares and vote against Sprint's May offer of $3.40 per share.

Sprint said it now has support from shareholders with 45 percent of Clearwire's minority shares, just shy of the more than 50 percent it needs to take over the company.

For example, it said it has commitments from a group of four activist shareholders that own about 9 percent of Clearwire's voting shares to support the deal.

Clearwire Chief Executive Erik Prusch said he was confident the deal can win over enough shareholders.

_0">

"That's completely different to where we were a short time ago," said Prusch who said the offer ended several days of intense negotiations between Sprint and Clearwire. Clearwire's efforts were led by Dennis Hersch, the head of its special committee, and John Stanton, Clearwire's chairman.

_1">

"The difference with this is that it comes with the validation of a group of our minority shareholders," Prusch said.

_2">

The group of four shareholders - Mount Kellett Capital Management LP, Glenview Capital Management LLC, Chesapeake Partners Management Co, Inc and Highside Capital Management LP - had publicly complained about Sprint's offer priced and teamed up to negotiate for a higher price.

_3">

The latest offer was the third time Sprint raised its bid since its first December offer to buy Clearwire's minority shares for $2.90 each.

_4">

The latest Sprint offer came just days before Clearwire shareholders were expected to vote down its previous $3.40 per share offer.

_5">

Clearwire postponed a June 24 shareholder vote until July 8 to give shareholders time to review the new offer.

_6">

Shareholders had complained that Sprint's previous offer was too low even before Dish made its counterbid at the end of May. Analysts and investors told Reuters that Sprint would need to raise its bid or risk a contentious relationship with Dish as a minority shareholder.

_7">

(Reporting by Sinead Carew; Editing by Gerald E. McCormick, Richard Chang and Bernard Orr)

_8">

SoftBank confident Sprint deal will close in July

SoftBank Corp CEO Masayoshi Son said on Friday he was confident his company's acquisition of Sprint Nextel Corp will be completed in early July after rival bidder Dish Network Corp failed to make a counter move this week.

SoftBank, a Japanese mobile network operator, is heading into the home stretch as it tries to push through Japan's biggest ever acquisition, while aggressive dealmaker Dish has loomed as a potential spoiler with rival offers for Sprint and its Clearwire Corp subsidiary.

Son, SoftBank's billionaire founder, said Dish's failure to raise its offer for Sprint before a deadline early this week brought the Japanese company closer to sealing the $21.6 billion deal, but warned that its U.S. rival could make a surprise move before a Sprint shareholders' meeting on June 25.

"We don't know what could happen before the meeting but we took a big step forward after Dish missed the deadline to make a new proposal," Son told an annual shareholders' gathering attended by more than 2,000.

Dish's challenge launched in April had forced SoftBank to consider other options, Son said, including buying No. 4 U.S. mobile carrier T-Mobile US Inc, which is 74 percent owned by Deutsche Telekom AG.

Instead, SoftBank raised its bid last week and bumped up the cash portion, in order to win support from several existing Sprint shareholders who had favored Dish's offer, while reducing its capital injection into the company.

On Friday, Son played down worries that the reduced funding to Sprint might hinder the U.S. company's ability to invest in new network infrastructure, saying the acquisition would allow it to achieve average annual savings of 200 billion yen ($2 billion) over the next four years.

Sprint moved on Thursday to take the upper hand in a separate battle with Dish over control of Clearwire Corp, raising its buyout offer to $5 per share, which it said had helped to win support from a key group of dissident Clearwire shareholders.

SoftBank shareholders applauded at Friday's meeting when Son said Sprint's bid had now won the support of Clearwire, which holds valuable wireless airwaves Sprint needs to update its network.

SoftBank's shares fell 1.8 percent on Friday to 5,360 yen, worse than the Nikkei benchmark's 0.7 percent drop.

SoftBank's shares fell to an eight-month low after it announced its Sprint bid last October, but since the start of this year they have climbed more than 70 percent as optimism mounted over the deal, while the Nikkei is up nearly 25 percent.

Last month SoftBank rose as high as 6,100 yen, its highest since the dot-com bubble burst more than a decade ago.

(Reporting by Mari Saito; Writing by Sophie Knight; Editing by Edmund Klamann)

Electric car maker Tesla unveils 90-second battery pack swap

Tesla Motors Inc on Thursday unveiled a system to swap battery packs in its electric cars in about 90 seconds, a service Chief Executive Elon Musk said will help overcome fears about their driving range.

The automaker will roll out the battery-swapping stations later this year, beginning along the heavily-traveled route between Los Angeles and San Francisco and then in the Washington-to-Boston corridor.

"There are some people, they take a lot of convincing," Musk said at an event at Tesla's Los Angeles design studio. "Hopefully this is what convinces people finally that electric cars are the future."

Electric cars have been slow to catch on with consumers because of their high price, limited driving range and lack of a charging infrastructure. Tesla has been working to address some of those issues with fast-charging stations and now with the battery-swapping technology.

A battery pack swap will cost between $60 and $80, about the same as filling up a 15-gallon gas tank, Musk said. Drivers who choose to swap must reclaim their original battery on their return trip or pay the difference in cost for the new pack.

Musk demonstrated two Model S battery pack swaps in the time it took for a car on a screen above the stage to fill up with gas, about four minutes.

The stations will cost about a half a million dollars each to build. They will be located alongside Tesla's fast-charging stations, which take around 30 minutes to charge the car's battery.

Musk told Reuters earlier this week that the battery-replacement network would entail an investment of $50 million to $100 million.

In contrast to several traditional automakers that have rolled out electric vehicles that failed to live up to expectations, Tesla has sold thousands of its luxury electric cars. Investors have embraced the company's strategy and Tesla shares have nearly tripled this year.

The announcement comes a month after Better Place, an electric vehicle company whose business was centered around battery swapping, said it would liquidate.

(Editing by Edwina Gibbs)

Technology unlocks gate to Wimbledon's English garden

Wimbledon, the world's oldest tennis championship, is embracing new technology with an iPad app to appeal to a younger audience.

The app allows users to navigate around the grounds via a photographic map, zooming in on specific courts to get updates on the state of play. They can also get alerts telling them how their favorite players are faring.

The All England Club (AELTC), which stages the tournament on the grass courts of suburban London, is in the position of knowing that demand for tickets far outstrips supply.

But with so many people unable to get tickets, the tournament's online presence has brought it closer to fans around the world, AELTC Commercial Director Mick Desmond said.

"If you can't come to Wimbledon, we want to try to make it the next best experience," he told Reuters.

"We try to position Wimbledon as tennis in an English garden but at the same time we want to be at the cutting edge of innovation," he added, speaking before the start of the tournament on Monday.

"It's allowing us to reach a younger audience."

Desmond, a former television executive who joined the AELTC three years ago, said making Wimbledon more accessible online helped to increase its appeal to sponsors and broadcasters.

The launch of the free iPad app follows a push into mobile in 2011 and an overhaul last year of the main Wimbledon website (www.wimbledon.com). The site attracted 17 million users in 2012.

Online features include Live@Wimbledon TV, fronted by former players Annabel Croft and Mats Wilander, which offers seven hours a day of video coverage.

The channel shows individual games but does not provide live streaming of whole matches to avoid undercutting the value of rights sold to broadcasters like the BBC in Britain and ESPN in the United States. It redirects users to the relevant broadcaster if they want full coverage of a particular match.

IBM also offers predictive software to help online fans to gauge the momentum of a match, point by point. For Wimbledon this will be complemented by a monitor of social media sentiment to show who is seen to be gaining the upper hand.

Drones were deployed before the tournament to take videos giving faraway tennis fans a bird's eye-view of the green lawns of Wimbledon, which first staged the tournament in 1877.

Increased revenues have helped Wimbledon to increase prize money this year by 40 percent to 22.6 million pounds ($35 million), with losers in the first round walking away with 23,000 pounds.

Despite the generous prize money, Wimbledon makes a healthy profit. It generated a pre-tax surplus of almost 38 million pounds last year, funds which are reinvested in British tennis. ($1 = 0.6466 British pounds)

(Writing by Keith Weir; Editing by Angus MacSwan)

Spreadtrum gets $1.38 billion buyout offer from China's Tsinghua Holdings

Chinese cellphone chip designer Spreadtrum Communications Inc said it received a $1.38 billion buyout proposal from a unit of government-owned Tsinghua Holdings Co Ltd.

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The offer of $28.50 per American depository share represents a premium of 28 percent to Spreadtrum's Thursday closing price on the Nasdaq.

Spreadtrum said its board is evaluating the proposal.

The company develops chips for smartphones, feature phones and other consumer electronics products, supporting 2G, 3G and 4G wireless communications standards.

Spreadtrum, which gets most of its sales from China and Korea, counts HTC Corp and Samsung Electronics among its customers.

Lower-priced smartphones are popular in Asia and are expected to drive growth in the mobile handsets market as the United States reaches saturation.

China has more than 1 billion mobile phone subscribers, with many switching from low-end feature phones to smartphones in the past few years as prices become more affordable with some smartphones selling for less than 1,000 yuan ($160) apiece.

Research firm IDC had forecast that China's smartphone shipments are expected to rise sharply to 460 million by 2017 and will make up nearly all mobile phone sales.

Spreadtrum and other Asian rivals such as Mediatek are improving their technology and are happy to sacrifice profits in exchange for market share in Asia.

Last week, Spreadtrum raised its revenue estimates for the second quarter by $50 million to $270-$278 million citing higher demand from low-cost smartphone makers.

Spreadtrum shares rose 21 percent to $27 in premarket trading.

(Reporting by Supantha Mukherjee in Bangalore; Editing by Saumyadeb Chakrabarty)

France to seek ban on Amazon bundled discounts, free delivery

France's Socialist government aims to introduce a law preventing online retailer Amazon from offering both discounts and free delivery for books in France, the culture minister said, arguing this amounts to unfair competition.

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Aurelie Filippetti said the government was looking for the right time to introduce a ban on the practice, which book sellers say threatens their business model by allowing Amazon to undercut their prices.

"I'm in favor of ending the possibility of offering both free delivery and a five percent discount," she told BFM news television on Friday. "We need a law, so we're going to find a legislative window to introduce one."

Amazon in France declined to comment.

Filippetti's remark underscored tensions between the French government and U.S. online firms such as Amazon and Google, which have been criticized for paying too little to the creators of cultural or news content.

France, like other European countries, bans retailers from discounting books more than 5 percent from a sale price set by the publisher. This is to prevent small sellers from being crushed by giant retailers that can absorb bigger discounts.

Guillaume Husson, spokesman for the SLF book retailers' union, said Amazon's practice of bundling a 5 percent discount with free delivery amounted to selling books at a loss, which was impossible for traditional book sellers of any size.

"Today, the competition is unfair... No other book retailer, whether a small or large book or even a chain, can allow itself to lose that much money," he said, referring to Amazon's alleged losses on free delivery.

The SLF union had sued Amazon for unfair competition before a French court, and the case was still being reviewed, he added.

France settled a dispute with Google in February over whether it should pay content providers for linking to news articles, which resulted in the firm creating a 60-million-euro fund to support the press. France made a new push against Google this week, arguing it broke French privacy laws.

Filippetti's comments raised the possibility of a similar public spat with Amazon.

"This is not just in France," she said. "Amazon's behavior, and the risks it poses for the survival of a whole network of book stores and the entire chain of book production, are obvious in Britain and in the United too."

(Reporting by Nicholas Vinocur; editing by Mark Heinrich)

ZTE to churn out more 4G devices

China's ZTE Corp, the world's fifth largest smartphone maker, is aggressively moving into the higher end of the market for mobile gadgets with more 4G shipments.

The Shenzhen-based company has been trying to move away from selling lower end mobile phones, a strategy that has served it well in boosting its global market share, but at the expense of pressuring margins and profitability.

It plans to further raise its global profile by sponsoring a U.S. National Basketball Association (NBA) team later this year, executives said.

"We're working towards a goal of 4G LTE (Long Term Evolution) gadgets making up 40-50 percent of our total consumer devices shipments by 2015. The percentage is quite small now -- about 4 percent," Lv Qianhao, ZTE's head of handset strategy, told reporters in China's southern city of Guangzhou, where 4G LTE trials are being conducted.

ZTE is banking on products such as its Grand Memo phablet -- a cross between a phone and a tablet, and its Grand S smartphone to battle the likes of Samsung Electronics Co Ltd, Apple Inc that have been dominating the market.

On Friday, ZTE executives showcased its LTE technology to reporters in a mini-van by driving through skyscrapers around a section of Guangzhou city while downloading video clips on its smartphones at speeds that are several ten-fold faster than 3G.

ZTE has been working closely with China Mobile Ltd, the world's largest wireless carrier by subscribers, in 4G trials throughout the country that has more than a billion mobile phone users.

Even though ZTE's flagship telecom equipment business has hit stumbling blocks in entering the U.S. market due to Washington's national security concerns, its mobile phones have been selling quite well, ZTE executives said.

"We have plans to sponsor an NBA team that Chinese consumers will say wow to, but we are still negotiating and nothing has been decided," ZTE spokesman David Dai said.

In the first quarter, ZTE cornered a 9.1 percent market share in global smartphone shipments, ranking behind Samsung, Apple, LG Electronics Inc and Huawei Technologies Co Ltd, research firm IDC said.

(Editing by Elaine Hardcastle)

Michael Dell urges shareholders to support his buyout bid

Dell Inc's billionaire founder Michael Dell said he would oppose any leveraged recapitalization of the company and called on stakeholders to vote in favor of his buyout offer, ahead of a shareholder meeting next month.

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Dell argued his case in a presentation filed with the U.S. Securities and Exchange Commission on Friday, saying that keeping any part of the company public while it transformed itself would hurt Dell's stock price.

That in turn would threaten customer perception and make it more difficult to keep employees, he said.

If his buyout proposal fails to sway shareholders, he reiterated that he will remain with the company but said he "will also oppose the kind of imprudent leveraged recapitalization that has been suggested by certain other parties."

Activist shareholder Carl Icahn, who says Dell's offer undervalues the company, on Tuesday promised shareholders that the company would buy back up to $16 billion of stock if they joined his campaign to stop the computer maker from going private.

Dell could fund a tender offer for its own shares with debt financing, Icahn said.

Michael Dell and private equity firm Silver Lake want shareholders to accept a $24.4 billion bid, aimed at taking the company private while it transform itself into a technology consultant for large companies, along the lines of International Business Machines Corp.

(Reporting by Nicola Leske; Editing by Gerald E. McCormick)

Interest hots up for Cupid's casual dating sites

Internet dating site Cupid Plc said a number of potential suitors have expressed interest in its casual dating sites, such as benaughty.com and flirt.com.

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Cupid said last month that it had been approached to sell its casual dating websites and was considering a range of approaches.

Earlier this month, a media report said co-founder Max Polyako was on the verge of bidding 40 million pounds ($61.86 million) for Cupid's casual dating business.

Cupid declined to comment.

The company offers several online dating services depending on whether users are seeking serious relationships or something more casual. It markets to people of different age groups, cultures and social interests, from its mature relationship website loveagain.com to its cheeky girlsdateforfree.com.

Cupid also serves its customers through smartphone applications such as cupid.com, which helps users find other single people at nearby locations.

Active users for Cupid's services rose 18 percent to 19.2 million in 2012 from the year earlier. Its major markets are the UK, Australia, New Zealand, South Africa and Ireland, which contribute over half its profit.

The company said on Friday that it expects higher marketing costs to hit the first half. Marketing expenses are the largest cost for Cupid, which has been looking to build a stronger brand identity for its key products and expand in countries such as India and Brazil.

Earnings before interest, tax, depreciation and amortization, for the six months ending June 30 is estimated to be about 2.5 million pounds. Cupid reported adjusted EBITDA of 5.9 million pounds for the same period last year.

Cupid, which faced media allegations earlier this year about the methods it used to encourage people to buy subscriptions, said an independent review of its member database and operating practices was due to be completed by the end of June.

The company said it has also undertaken a separate review by a legal team and implemented several recommendations, including clearer guidelines for customer service staff interactions.

Shares in the company were down 3 percent at 66.8 pence at 0954 GMT on Friday on the London Stock Exchange. They have lost roughly two-thirds of their value so far this year. ($1 = 0.6466 British pounds)

(Reporting by Tasim Zahid in Bangalore, Writing by Brenton Cordeiro,; Editing by Supriya Kurane)

(This story corrects to remove reference to "crazy blind date" smartphone application in paragraph 6, a product from OKCupid, an unrelated firm)

Yahoo's Mayer shines spotlight on video

As Marissa Mayer approaches her one-year anniversary as chief executive of Yahoo, she's hewing closely to the struggling Web portal's traditional advertising model--and eyeing more video programming of every stripe as central to the strategy.

"We're working on various methods in terms of how we can increase our video views, and watching," Mayer said at the Reuters Global Technology Summit on Thursday. "It's clear to me that our video business is something that's growing a lot. It's something that we'd like to accelerate."

Yahoo is currently bidding to acquire Hulu, the online hub for TV programming owned by Walt Disney Co and News Corp, sources with knowledge of the situation have told Reuters.

Mayer would not comment on the bid for Hulu.

The Web pioneer was looking at buying French video site DailyMotion but had to abandon the effort after objections from the French government.

Yahoo also has a growing menu of original video programming, such as the critically-acclaimed Burning Love TV reality show spoof, and it recently acquired the rights to the archive of Saturday Night Live television programs.

Online video commands higher ad rates than other types of Web content and has become a fiercely competitive arena as it is increasingly viewed as a bulwark against the steady decline in prices for online display ads.

On Thursday, Instagram, the mobile photo-sharing app owned by Facebook Inc, introduced a new feature that allows users to create 15-second videos. Facebook itself is reported to be readying an online video ad format. Google Inc's YouTube, the world's No.1 online video destination, is expected to generate $5 billion in revenue this year, according to RBC Capital Markets.

Mayer took the top job at Yahoo after a tumultuous period in which the company had churned through several CEOs and many of its top executives and engineers jumped ship.

She has revamped key products such as mail and the Yahoo home page, implemented morale-boosting measures like free food, and jumpstarted acquisitions. On Thursday, Yahoo closed its $1.1 billion acquisition of Tumblr, a blogging service that is one of the Web's most popular hubs of user-generated content.

Yahoo's stock has surged roughly 70 percent since Mayer became CEO. But Wall Street analysts say much of the gain has come from stock buybacks and from Yahoo's Asian assets, including a 24 percent stake in Chinese e-commerce giant and potential IPO debutante Alibaba Group.

PEANUT BUTTER AND JELLY

Yahoo's biggest near-term goal and most important yardstick by which to measure its progress will be the rate of increase in the amount of time users spend on its websites, Mayer said.

"Yahoo's ability to generate revenue for a thousand pages is reasonably good," Mayer said. "The challenge for Yahoo at the moment is traffic. How do we grow traffic? How do we gain usage? Because that ultimately will drive up revenue."

While rivals such as Google have experimented with new revenue streams, including subscription music services and online retailing, Mayer said Yahoo remains squarely focused on advertising.

"I believe in ads, I like ads. We may try some other things but Yahoo is an ad company," Mayer said, but added that it does not mean Yahoo will cut on its own original programming.

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The company's headcount has decreased by about 1,000 employees during her first year, through a combination of attrition and ramped-up performance management, with staffers now getting reviewed on a quarterly basis instead of every year, she said.

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But Mayer said the company was aggressively pursuing new talent: job applications recently peaked at 10,000 a week, more than twice the level of a year ago.

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At the same time, Mayer has moved to cut back the thickets of bureaucracy that she said had sprouted across the company over its 18-year history.

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Mayer installed a system called PB&J, short for Process, Bureaucracy and Jams. That has eliminated roughly 700 irksome or unnecessary procedures within the company, such as forcing employees to undergo a special orientation for the company gym.

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"I understand that we are geeks and we may not be that coordinated but I think we can all figure out how to use a treadmill without an orientation," Mayer said.

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Some industry-watchers assumed the PB&J moniker was an homage to the so-called "peanut butter manifesto," in which former Yahoo executives warned of problems plaguing the company.

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Mayer said the real story was much simpler.

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"Most days for lunch I have a peanut butter and jelly sandwich," she explained. "So sitting there I was like 'Can we call it something simple and fun like PB&J?' And we kind of backed into process, bureaucracy and jams. But it works."

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Follow Reuters Summits on Twitter @Reuters_Summits

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(Additional reporting by Poornima Gupta and Edwin Chan. Editing by Jonathan Weber and Edwina Gibbs)

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EU blocks German plan for higher fixed phone rates

The European Commission blocked plans by Germany on Friday to raise the fees alternative telecommunications operators charge each other to connect fixed-line phone calls.

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The German telecoms regulator (BNetzA) proposed raising these call termination fees to three times the average rates in many parts of Europe to compensate for steadily declining revenues in the sector. There are over 50 alternative operators in Germany.

But the Commission, which opposed similar fee proposals for Deutsche Telekom early this year, is seeking to harmonize such rates across Europe.

"It is important for building up a real single market that both operators and consumers face termination rates in Germany that are in line with those in other EU Member States," the EU Commissioner for telecoms Neelie Kroes said on Friday.

The commission did not name any alternative operators in its decision but there are over 50 in the German market including EWE Tel GmbH and 1&1 Internet AG.

The German regulator had said it planned to raise rates to 0.0036 euros per minute at peak times and 0.0025 euros per minute at off-peak times.

These figures are the same as the rates BNetzA proposed for Deutsche Telekom. Operators following the Commission's stance charge on average 0.001 euros per minute.

The German regulator and the EU will now negotiate for a three-month period to seek a compromise, the Commission said. In the meantime implementation of the proposed rates is suspended.

(Reporting By Claire Davenport; Editing by Ruth Pitchford)