Judge Rejects Subpoenas of Fed Board in Powell Case

Summary

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Bloomberg Businessweek Podcast Summary

Episode: Judge Rejects Subpoenas of Fed Board in Powell Case
Date: March 13, 2026
Hosts: Carol Massar & Tim Stenovec

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Episode Overview

This episode centers on breaking legal and political news involving the Federal Reserve and its Chair, Jerome Powell, as a federal judge rejects Justice Department subpoenas targeting the Fed over renovations and Powell's congressional testimony. The hosts analyze the legal and political consequences, potential Fed leadership changes, and implications for Fed independence.
Other segments take a broader look at financial market volatility, the private credit cycle, and a feature on wartime resilience and digital transformation at Ukraine’s top mobile operator. The episode concludes with a deep-dive on AI’s expanding role in US military operations, tying into wider global themes about tech, security, and policy.

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Key Segments & Discussion Points

1. Breaking News: Judge Quashes DOJ Subpoena of the Fed Board

[02:12-12:01]

What Happened

• A federal district judge rejected DOJ subpoenas seeking Fed records about headquarters renovations and Chair Powell’s congressional comments.
• Judge argued there was “no evidence to justify the subpoenas” and implied they were motivated by retaliation over policy differences.
• DOJ, represented by U.S. Attorney Jeanine Pirro (formerly of Fox), announces intent to appeal.

Political Context and Fallout

• Potential impact on the nomination of Kevin Warsh as the next Fed Chair, with Senate opposition from Thom Tillis if the appeal proceeds.
• Discussion on President Trump’s motives—whether delays serve to install Stephen Myron as Acting Chair after Powell's term ends (May 15).
  • “[Trump] doesn’t really care all that much about the delay if he can...name Stephen Myron as acting chair at that point.” – Carol Massar [05:24]
• Concerns about undermining Fed independence and the appearance of politically inspired legal action.
  • “The ruling confirms just how weak and frivolous the criminal investigation of Chairman Powell is and it seems is nothing more than a failed attack on Fed independence.” – (paraphrasing Tillis) [04:22]

Legal Insights (with Elliot Stein, Bloomberg Litigation Analyst)

• Technical critique: Judge Boasberg may have used too high a standard ("probable cause") for issuing subpoenas—a possible error the DOJ might exploit in appeal.
• If the legal standard for subpoenas was misapplied, and there are valid grounds for DOJ investigation, appeal would likely proceed regardless of politics.
  • "If they think the judge got the legal standard wrong, then, yes, I would expect the Justice Department to appeal...regardless of politics." – Carol Massar [08:04]

Judicial Color and Background

• Judge Boasberg is an Obama appointee, with a history of rulings against the Trump administration.
• Personal connection: Was roommates at Yale with Supreme Court Justice Brett Kavanaugh, a noted supporter of Fed independence [11:05].

Notable Quote

• “It felt combative...this felt like it was performative for television, which, you know, President Trump, I think, likes.” – Carol Massar on Jeanine Pirro’s press conference style [09:38]

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2. Market Update: Private Credit Cycle & Economic Risks

[13:58-21:48]

Fixed Income & Credit Markets Discussion

Guest: Mike Collins, PJM Fixed Income Managing Director

• Recent credit selloff has identifiable drivers: oil price spikes from Iran conflict, high short-term rates, and rising concerns in private debt markets.
  • “The private markets...are tiny compared to the mortgage market in 2007...the banks are not levered at all going into this.” – Mike Collins [16:18]
• Collins dismisses parallels to 2008, stating private credit risks are smaller and more contained, due to regulatory changes and risk offloading from banks.
• Banks’ exposures are manageable; stress remains contained, unlike pre-GFC (Global Financial Crisis) levels.
  • “Credit spreads are widening...that's a lot. And over the last handful of years, when you've seen that kind of move, it's typically been...where people...step in and buy.” – Mike Collins [17:55]
• Collins’s main concern: higher rates, not credit quality.
  • “It’s the rate side...The credit side is actually in good shape...But the rate side is causing some of the problems.” – Mike Collins [20:05]
• Historical analysis: geopolitically induced oil shocks often result in lower inflation/Fed rates one year later, suggesting market over-focus on inflation risk [21:35].

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3. Wartime Resilience & Innovation: Kyivstar (Ukraine’s Largest Telco)

[24:19-35:36]

Guest: Alexander Komarov, President & CEO, Kyivstar

Operating a Telecom Under War Conditions

• Kyivstar’s network operates reliably despite ongoing war, largely by investing in alternative energy and network redundancy.
  • “During Dec-Feb, 30% of the time our network was on alternative sources...network was fully operational across the country.” – Komarov [25:14]
• War-related costs have cut EBITDA margin from 67% to 56%, but company continues to invest in both resilience and new digital services (health, entertainment, ride-hailing, big data) [27:11].
• To hedge rising energy costs, Kyivstar is investing in solar and other alternative power sources.
• Launched Europe’s first direct-to-cell service with Starlink—offered free as a humanitarian necessity during war [30:01].
  • “We provide this service to our customers for free, taking into account the current circumstances and...fundamental humanitarian need to stay online.” – Komarov [30:01]

Market and Demographic Challenges

• Main challenge: demographic crisis from war-driven emigration; company serves millions of Ukrainians abroad.
  • “On a monthly base around 2 million customers being serviced abroad...these are Ukrainian migrants still connected to Ukraine through Kyivstar.” – Komarov [32:56]
• Customers increasingly use multiple SIMs to ensure redundancy during blackouts.
• Minor presence in the UAE; most operations are Ukraine-based [34:44].

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4. Big Take: AI Deployments in US Warfare—Project Maven’s Expansion

[38:01-45:18]

Guest: Katrina Manson, Bloomberg National Security & Tech Reporter, author of Project Maven: A Marine Colonel, his Team and the Dawn of AI Warfare

US Military’s AI Revolution

• US CENTCOM confirms use of Project Maven's “Maven Smart System”—an AI platform (by Palantir)—to process surveillance data, generate “points of interest” and speed targeting decisions in Iran operations.
  • “It is something that...using computer vision, AI and more than 150 different data feeds...generates points of interest...processes that used to take months and days...down to seconds.” – Katrina Manson [38:46]
• Other countries (notably NATO allies) have access to the system, but the US’s is unique for its data feeds.
• Project Maven began in 2017 to harness AI in analyzing drone footage; now part of a wider acceleration of AI in military planning, especially with the US focusing on Chinese military capabilities [41:00].

Commercial Tech’s Role

• Palantir (AI/data integration), Microsoft, and startups like Clarifai (shifted from commercial image recognition to weapons ID) are key industry partners.
  • “They...convinced him [Matt Zeiler, Clarifai CEO]...to start bringing his technology to bear on difficult US national security problems, knowing it would be controversial...” – Katrina Manson [42:59]

Looking Ahead: China & the “Hellscape” Concept

• US military planning assumes China could have the capability to take Taiwan by 2027, pushing urgent investment in autonomous, AI-enabled defensive systems.
• “One of those ideas is something called Hellscape...autonomous weaponry out there, drones, to stop any Chinese invasion, buy him time for a month...” – Katrina Manson [44:05]

Book Release

• Project Maven book available March 24, 2026 [45:15].

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Notable Quotes & Moments

• On Fed legal battles:
  “The judge said...the government had advanced no evidence to justify the subpoenas and said they clearly reflected a, quote, improper motive of retaliating against Powell over policy differences.” – Tim Stenovec [02:12]
• On the nature of appeals:
  “If they think the judge got the legal standard wrong, then, yes, I would expect the Justice Department to appeal...regardless of politics.” – Carol Massar [08:04]
• On AI in war:
  “(AI is) helping speed up processes from what used to take months and days down to seconds.” – Katrina Manson [38:46]
• On preparing for possible conflict with China:
  “Iran is an amazing precursor to what could happen with China over Taiwan.” – Quoted by Katrina Manson [43:34]

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Timestamps for Major Segments

• Judge Quashes Fed Subpoenas, Political Fallout & Legal Analysis: [02:12-12:01]
• Market Update: Credit Selloff & Private Debt: [13:58-21:48]
• Ukraine Telco Strategy & Resilience During War: [24:19-35:36]
• Big Take: US Military AI, Project Maven & Future Warfare: [38:01-45:18]

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Takeaways for the Listener

• The DOJ’s high-profile battle with the Fed is deeply entangled with US political maneuvering, legal process, and the future of US monetary policy leadership.
• Despite headlines, current credit market risks differ fundamentally from 2008, but higher-for-longer rates and geopolitics remain watch areas.
• Ukraine’s largest mobile company demonstrates business resilience and technological adaptation in wartime conditions.
• The US military is rapidly deploying AI for operational advantage, foreshadowing how near-future wars may be shaped by tech collaboration between government and Silicon Valley.
• The intersection of law, politics, finance, and technology is reshaping both domestic and global landscapes in real time.

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For further details, replay this episode or follow the chapter timestamps above for key insights.

Transcript

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[Tim Stenovec]

I just want to bring everyone up to speed on the breaking news that we've been following. The Judge A judge has rejected subpoenas of the Fed in a Powell case. The Justice Department will appeal. We did Just hear from U.S. attorney for Washington Jeanine Pirro. A federal judge rejected an improper Justice Department subpoenas issued to the Federal Reserve Board seeking records relating to its renovations of the headquarters in and chair Jerome Powell's comments to Congress about the project under the judge. The judge said the US District Judge Rather said that the government had advanced no evidence to justify the subpoenas and said they clearly reflected a, quote, improper motive of retaliating against Powell over policy

[Jamie]

differences for what it's worth. Over on Fox Business, we've got Bill Pulte who is chair of the Federal Housing Finance Finance Agency and he is making some comments too that the DOJ and Jeanine Pirro getting to the bottom of what's going on. And he too is saying that the Fed chair, Jay Powell, has got to go. Yep. So it continues. Let's get to it though, with a member of our team who's been following all of this. Elliot Stein is with us right now and he is litigation analyst for Bloomberg Intelligence.

[Tim Stenovec]

Elliot, it's good to have you with us. It's a perfect, perfect voice on this because certainly the Fed story is part of it, but a big part of the story is to what happens legally. So what the judge said and then now what Jeanine Pirro, the U.S. attorney is planning to do with an appeal. What is that?

[Carol Massar]

Yeah, I mean I think the most interesting thing is that she said they're going to appeal this because this, she could have taken this as an off ramp to end the investigation. She's not doing that.

[Tim Stenovec]

That would have gotten Kevin Warsh on the board because then Thom Tillis would have said, okay, I'm not going to this anymore. And that would have been a win for President Trump. She said I don't who this guy is and she doesn't care.

[Jamie]

Is that a question to ask though? It was an off ramp for President Trump to continue to pursue with his choice for Fed chair.

[Carol Massar]

Exactly. And they're not taking that off ramp. And Tillis has already tweeted. So you know this really what did Tillis said? Tillis said don't appeal this cuz that's just going to delay the Boris nomination, which is what we expect to happen now. Cuz an appeal is likely. I mean it could be done.

[Jamie]

He said the ruling confirms just how weak and frivolous the criminal investigation of Chairman Powell is and it seems is nothing more than a failed attack on Fed independence. We all know how this is going to end and The D, the D.C. u.S. Attorney's office should save itself further embarrassment and move on. Appealing the ruling will only delay the confirmation of Kevin Warsh as the next Fed chair. Does does this okay, this isn't your purview, but I mean, might the president want to delay Jay Powell maybe leaving? Is that not.

[Carol Massar]

Well, you know, it's interesting because I was just looking at this to see what happens on May 15 when Powell's term comes to an end as chair.

[Jamie]

Right.

[Carol Massar]

And Warsh's nomination, let's say, is stalled due to this Ongoing investigation and Tillis problems with it.

[Ben Walter]

Right.

[Carol Massar]

And in that scenario, I think there's a decent chance that Powell has to step down from his chair position, not from the board completely. That's still tbd if he's gonna stay on or not.

[Jamie]

His choice on that.

[Carol Massar]

His choice. Although this prob probably, if the investigation continues, probably motivates him to stay on the board even when he's not chair. But I think he will have to step down AS chair on May 15. And then I think there's a good chance Trump could name Stephen Myron as acting chair. So, you know, maybe Trump doesn't really care all that much about the delay. If he can. If he's planning on naming Steven Myron as acting chair at that point.

[Jamie]

That's just kind of fascinating because it does seem like Myron is somebody who would be much more to do the pres. Some would say the president's bidding versus Kevin, who we have known his history of being a little bit more harmless.

[Tim Stenovec]

And just to be fair to Stephen Myron, he has said on Bloomberg Television and in interviews that the president has never asked him.

[Ben Walter]

Right.

[Tim Stenovec]

To do certain things when it comes to rates.

[Jamie]

Exactly.

[Tim Stenovec]

Okay, so, Elliot, I want to get to the analysis of the legal argument here and really what Jeanine Pirro, the U.S. attorney in Washington, D.C. what she argues is where the judge went wrong and how she's going to appeal this. What's her legal avenue?

[Carol Massar]

Yeah. So I haven't read the judge's decision. And by the way, notably, the judge here is Judge Boasberg, who has sort of been a thorn in the side of the administrative. The Trump administration because he's ruled against him on many things. Deportation to Doge and the Justice Department.

[Tim Stenovec]

I think she called him an activist judge.

[Carol Massar]

Yeah. I think the Justice Department even launched an impeachment investigation against him. So, you know, there's a history here as well. But. So I haven't read his decision. I thought it was notable that Pirro said that he cited probable cause as sort of the standard to issue a subpoena, which is not really. That's the standard to indict someone not to issue a subpoena. It's sort of a lower standard to issue a subpoena. So if he, if that's. If he cited probable cause as the standard that wasn't met to issue a subpoena, then maybe there's grounds for an appeal. But I haven't read the decision. You know, I read the first two pages, and it started with all the things that President Trump said about Chair Powell not lowering rates and things like that, you know, so he suggested that this is a pretext, which, you know, probably is. Right.

[Jamie]

But, Elliot, I want to take politics out of this. If, like, let's just, you know, go to a bizarro world. And this was actually a Democrat president in the White House who was pursuing something against the Fed Chair, and this is how it's played out, would you assume that the U.S. attorney for Washington, D.C. who we'd assume would be a Democrat at that point, would do the same thing and appeal? Like, I'm just trying to understand, is this kind of crazy from a legal standpoint or.

[Katrina Manson]

No, it's.

[Jamie]

It's to be expected.

[Carol Massar]

If they think the judge got the legal standard wrong, then, yes, I would expect the Justice Department to appeal. If they thought they had, you know, reasonable grounds for an investigation, if they thought it was leading to probable cause for an indictment and they think that the subpoena was valid and the judge's standard for quashing it was wrong, then, yeah, I would expect an appeal regardless of politics. But it's sort of hard to divorce, you know, politics. Is it really in this scenario? Yeah, I mean, I think I'm trying to be fair.

[Jamie]

Yeah, I'm just trying to.

[Carol Massar]

I think there has been, you know, I mean, just. There's a history here of President Trump trying to get rid of Chair Powell and the Justice Department being much less independent than it has been historically.

[Tim Stenovec]

So on that, and the U.S. attorney, Jeanine Pirro, I described her press conference, and anyone listening can judge it for themselves, but it was very spirited and energetic, and I think not typically the type of press conference that we'd seen from. See, from a U.S. attorney. She did talk about her background serving in different elements of the law. She. She did not mention her time on Fox TV with Fox, and which I think is. Is fair to say at this point, where the President got exposure to her and then chose her for this position. What. What did you just think of the way that she communicated to the press and to the American people about her motivations here and how she's seeing the legality around this?

[Carol Massar]

Yeah, I mean, it felt combative. It felt a good word for it. Yeah, I thought. I mean, you hit on this as well when she was talking about her, you know, 30 to 40 years as a prosecutor, you know, both as a DA and then I forget, Judge. Yeah. She has served in the public interest for several decades, but she did leave off the talk show component, and this felt like it was performative for television, which, you know, President Trump, I think, likes.

[Jamie]

All right, so what are you watching for next? You said, like, to be fair, you haven't read everything that we've gotten from the judge in terms of his ruling. What are you gonna be looking for as you do go through it?

[Carol Massar]

Well, I'm gonna be looking to see why he, you know, why he quashed the subpoena, what his standard was, and if there are grounds, you know, reasonable grounds for the Justice Department appeal it. They also said they're going to ask the judge, I think, to reconsider his decision. So that'll probably be the first step before they then go to an appeal, which is only going to delay the war's nomination even further.

[Jamie]

Elliot, what do we know about this judge?

[Carol Massar]

So like I said, Judge Boasberg, he has a history with the Trump administration.

[Jamie]

Who appointed him?

[Carol Massar]

I believe he is a Biden appointment, maybe Obama.

[Tim Stenovec]

But Yeah, appointed in 2011 by President Obama and then confirmed in the Senate.

[Carol Massar]

But here's something interesting. In law school, he was roommates with Justice Kavanaugh. And Kavanaugh was one of the, you know, he's on the Supreme Court now, obviously. He has been noticeably in favor of Fed independence both in the Lisa Cook case and in the Rebecca Slaughter case, which is the FTC case. That's sort of related, right. In terms of who the president can fire, president cause or without cause. And even in the Slaughter case, Justice Kavanaugh brought up questions about, you know, what that case will mean for Fed independence. So it's sort of interesting. Apparently Boasberg and Kavanaugh are still friendly. Not that this, you know, influences their decisions. It's just sort of a little color.

[Tim Stenovec]

It's a small world.

[Carol Massar]

Small world in the judicial circles.

[Jamie]

Here it is.

[Katrina Manson]

Right.

[Jamie]

Interesting in knowing that. Listen, we so appreciate it. You know, fast and Furious, not a quiet Friday again. Elliot, thank you.

[Carol Massar]

My pleasure.

[Jamie]

Really appreciate it. Elliot Stein, he's Bloomberg Intelligence senior analyst for litigation, joining us right here.

[Tim Stenovec]

Stay with us. More from Bloomberg businessweek Daily coming up after this.

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[Mike Collins]

Yeah.

[Tim Stenovec]

Let's talk to today's trade. I want to bring in Mike Collins, PJM Fixed Income Managing Director and Executive Portfolio advisor, joining us from Sarasota, Florida. $1.5 trillion in assets under management for the company. Overall fixed income about $1 billion. Mike, something has shifted when it comes to the credit sell off in recent weeks. There have been identifiable drivers. What are you seeing, Art, in a fixed income market? Is, is, are people more risk averse right now?

[Mike Collins]

Yeah, absolutely. Right. This big spike we've seen in oil associated with the conflict in Iran is definitely keeping, you know, giving people pause with regard to the overall economic backdrop. Right. I mean, you're seeing the front end, as you've been talking about with Mike McKee, Elevate over the last two weeks. It's really remarkable, Tim. Right. I mean, since February 28th, as Mike said, a lot of things have changed. The front end has taken out two full Fed rate cuts off the market in two weeks. Right. It's really a remarkable change. And that alone, I think, puts pressure on financial assets, on financial conditions on top of the oil prices you were talking about, gas prices at the pump will hurt people's pocketbooks. We did an analysis this morning. If oil goes from 100 to 200, you know, that cuts GDP a lot. That means a lot of people, Instead of spending 5% of their discretionary income on gasoline, it doubles to 10. Right. And that really puts a halt on consumer discretionary spending. And on top of that you've had all these idiosyncratic credit problems emanating mostly from the leveraged loan market or the private debt markets. And that's giving people worrisome ideas of maybe we're getting late stages in this credit cycle. And obviously you've seen the parallels, at least in the press to 2008, which I, which I really dismiss. And we can talk about that.

[Jamie]

So let's go right there. B of A. Michael Hartnett is actually out, Mike Collins and talking about the spike in oil prices, also about the growing concerns around private credit, which we talk about, as you know, every day here at Bloomberg. And he is saying that they're causing kind of market activity to resemble the lead up to the global financial crisis. Do you agree? And there's anyone. As you know, Jamie, like, I don't.

[Mike Collins]

I think, I think what happens is when you get later in a cycle, in a strong bull market cycle. Right. We've had a raging bull market in almost all financial assets over the last handful of years, obviously with that temporary dip during COVID but really it's been in kind of an extended cycle here. Whenever you have that type of expansion and equity multiples skyrocketing, you know, you kind of get this culture of greed and everybody wants to hit the next home run. And that's when you start seeing evidence of fraud, evidence of really aggressive financing, evidence of some re leveraging and weaker underwriting. Right. So we're seeing all of that happen and it typically happens in the area that are getting the most inflows, the most demand for assets. And that just happens to have been in the murky private credit type of markets where there is a lot less transparency, a lot less pricing regularities. And so you're seeing that. And to me that's just a very natural phase of the cycle. But man, the private markets, Carol, are tiny compared to the mortgage market. For example, in 2007, it's like a tenth of, of the size of that. Right. And, and the banks are not levered at all going into this.

[Jamie]

So, so there, you know, they do have exposure, Mike. They do have exposure. That reminds us that it's not just within kind of firms outside the traditional financial. I see what you're saying. I see you shaking your head. I mean you say that that's not going to be problematic.

[Mike Collins]

You know, they have some exposure. But. Right. The private, the growth in the private debt markets is really kind of offloaded. Yeah, the banks who used to make those loans, those riskier loans and after the financial crisis the regulations really required them to take less risk and not invest in companies that had more than six turns of leverage, for example. So all of that, that kind of risk went to other places that kind of have a better asset liability mismatch, that you don't have a run on the banks necessarily in the private debt markets because you do have the ability to put up these, these gates and restrict outflow. So, so I think it's very, very different. But credit spreads are widening, right? They are almost 25% wider from the tights earlier this year. And that's how we think of credit spreads in our, in our world. Like how much wider are they on a percentage basis? And that's a lot. I mean, that's a big move. And over the last handful of years, when you've seen that kind of move, it's typically been the area where people kind of see, step in and buy, Right? And yeah, and you've seen demand in the corporate and high yield markets, really strong demand for, at higher yields for our bonds.

[Jamie]

So. So Mike, I mean, you're not seeing, in terms of your exposure, the firm's exposure in the private credit world. You're not seeing any kind of signs of stress, any kind of problems, anything?

[Mike Collins]

No, no. But I mean, we've, you know, we've been, you know, not to, not to talk our own book. We've been doing private credit for a century, Carol, and you know, we're a very conservative underwriting shop at Prudential, at Peach, and we always have been. We have a large cap private credit strategy. We've looked at over 200 deals last year and we've invested in 25 of them. Right? That's how you do private credit. And so, I mean, they're all different flavors of it. And if you look at the funds that are gigantic, these multibillion dollar funds that bring in all this money, they really have to put that money to work, right? So they, they have to be a little more, a little less discerning.

[Tim Stenovec]

So if private credit, if this is not a concern to you, what is a concern to you in this environment? Is it an inflationary environment because of higher oil prices? Is it a war that drags on? What is it?

[Mike Collins]

Yeah, to me, it's, it's the rate

[Jamie]

side, higher rates, right.

[Mike Collins]

That's a little confusing. I think the credit side is actually in good shape. We just got the results from the fourth quarter of all the corporate earnings. In fact, Morgan Stanley just put out a report this afternoon on, they update the credit fundamentals of the investment grade and high yield corporate bond markets and they have not deteriorated at all. Right. In fact, they even slightly improved on the margin. So the leverage in the public credit markets is really good and companies are in really good shape. But the rate side is causing some of the problems.

[Alexander Komarov]

Right.

[Mike Collins]

Some of these misfortunes, the repricings, you see these sudden drops in prices in the private markets, a lot of them are being attributed. Yeah, there's some fraud, but just wow, rates are a lot higher than when we underwrote this deal. And these companies that have a lot of leverage are struggling to refinance their debt at these higher interest rates. So the sustainability of these high rates kind of weighs on credit quality for sure. You see all the leveraged loan companies that issue floating rate debt, right. They are being hurt by higher rates. And so I'm looking at, you know, these higher oil prices. And this morning we actually did a study, we went back and looked at all the big geopolitically induced oil price shocks and what happens to inflation and what happens to the fed funds rate after that. And in almost all cases, believe it or not, inflation is actually lower a year later and the fed funds rate is lower a year later. So I'm looking at the market's reaction to this war and all their pricing in right now, all the bond market is pricing in is the inflation side of the equation, not the, not the recession side.

[Ben Walter]

Right.

[Mike Collins]

So I'm looking at this as a buying opportunity.

[Katrina Manson]

Well, and this is some of what

[Jamie]

Mike talked about to our Mike McKee about maybe further down the road that there is actually some problems in the economy. Mike, great stuff. Great to check in with you on this Friday. Have a great weekend.

[Mike Collins]

Thank you.

[Jamie]

Mike Collins. He is PJM Fixed Income Managing Director and Executive Portfolio Advisor joining us from Florida.

[Tim Stenovec]

Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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listening to the Bloomberg Business Week daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on on Apple CarPlay and Android Auto with the Bloomberg business app or watch us live on YouTube.

[Jamie]

Well, shares of the ADRs of Keepstar Group rallying today after the Ukrainian largest telecommunications company mobile network operator did report earnings per share for the fourth quarter that beat the average analyst estimate. Shares are down about 15% year to date often move understandably so. Tim, on the headlines concerning the war between Russia and Ukraine, I want to

[Tim Stenovec]

bring in Alexander Komarov. The president and CEO of Keystar Group joins us from Kyiv, Ukraine. Alexander, good to have you on the program. We want to start before we get to the business just on an update on what you're seeing, what life is like now that this war is in its fifth year. What can you tell us?

[Alexander Komarov]

Okay, it's almost normal war during the war. Okay. We adopted a lot. Okay. So I can give you only one example. So during the December, February, 30% of time our network was on the alternative sources of energy like batteries and generators.

[Tim Stenovec]

Wow.

[Alexander Komarov]

But at the same time network was fully operational across the country. So this is from my perspective a good reflection of where we are.

[Tim Stenovec]

Yeah, go ahead Carol.

[Jamie]

How do you do that though? How do you. Are you constantly repairing and fixing things or how do you, how do you keep things operational?

[Alexander Komarov]

Situation is relatively stable across the territories under Ukrainian control. The only one threat is a shy hats drones or missile threats that are not so fundamental for the so well distributed infrastructure like telco operator. Of course we are suffering a lot in the areas that are close to the front line and we are doing our boss in order to, in our best in order to restore and recover as soon as possible. And this is very much because of the heroism of our people and preparation and actually certain experience that we were able to gain during these four years in a war. We are doing a lot in order to strengthen our resilience. We did a lot of investments into the redundancy. We did a lot of investments, almost 100 million into the energy resilience. So from our 16,000 sites right now we can run almost 6,000 sites on the generators and this number is increasing on the, on the batteries. We can run network literally for up to 10 hours without energy at all.

[Tim Stenovec]

Alexander? I mean it's, it's. I don't want it to sound crass how I'm asking this because it's a business question but, but that's kind of how you've presented the challenge here. When you run a network in a way that has to be resilient during wartime and you talk about using generators or other sources of backup power that costs a lot more money and hits the bottom line in a different way than if you didn't have to rely on those resiliency measures. How much more is it costing you?

[Alexander Komarov]

Actually we see a certain decline of our marginality since the beginning of the war. This is from the position that Keith Star used to be the best by marginality telco across the globe with a record high 67% EBITDA margin. We are right now at the level of 56% EBITDA margin. The biggest challenge for us is how to let's say combine this resilience necessity to be extremely focused on our daily operations with the development and this is I think what we are doing in a really well, I will say very well organized, in a good format, you know, being able to achieve a quite significant diversification of our business from a pure telco in a mobile and fixed market leader in a mobile and fixed business to the digital service provider with a telco license. We finished this year with almost 16% digital revenue that is partially related to the telco but produced by the services like digital health, entertainment, ride hailing big data.

[Tim Stenovec]

Well, well on, on the cost side does the new war in in Iran and higher energy prices associated with that hit margins in this current quarter?

[Alexander Komarov]

To some extent we adopted since the beginning of the war Ukrainian market was characterized by A relatively low energy prices before the war.

[Tim Stenovec]

Okay.

[Alexander Komarov]

But because of the shortage, because of the destroyment of the production facilities by the Russians. Okay, so. And necessity to import energy from the neighboring countries. Right now Ukrainian business is working on the Eastern European and sometimes even Western European tariffs. Okay. And from this perspective, I think that we are quite. Okay, okay. We adopted this growing cost. Okay. And we are doing some proactive steps how to hedge this cost in the future. Maybe you saw, but we did our first small investments into the solar power plant. And this is the way how we can increase resilience and redundancy of the energy supply. But from another perspective, this is the way how we can hatch electricity cost on the consolidation level of the Kiev Star Group.

[Jamie]

You know, Alexander, that was one of the things I was curious about. Like you mentioned, you're combining resilience with development and you know, how much you can do of just keeping the company, you know, running day to day and your employees safe and meeting what your customers need amid a war versus thinking about strategy longer term and how you want to, you know, commit funds, capex, what have you to build out the business longer term. It sounds like you're able to do that.

[Alexander Komarov]

Yes, yes. The reality company is performing quite good. We have support of the shareholders. And I can give you probably the best example how we see the combination of the, let's say growing resilience and redundancy with the development. We were, and we are actually the first European operator to launch direct to cell services provided by Starlink. Okay. So we see this as a development because we are big. We believe that actually the future is in cooperation between terrestrial and non terrestrial networks. That's why we are doing this proactive tab. But at the same time, we provide this service to our customers for free, taking into account the current circumstances and major fundamental humanitarian need to stay online. Okay. Within very difficult circumstances, sometimes circumstances that are dangerous to your life.

[Mike Collins]

Yeah.

[Jamie]

Hey, one of the things I'm curious about when you say Starlink, do you think at some point like that is what kind of replaces some of the traditional telecom mobile service companies? Is that kind of where things are going?

[Alexander Komarov]

I don't think so. I think that the future in cooperation rather than competition, okay. Every country is quite unique. It's a difficult regulatory framework and somehow satellite networks have a fundamental disadvantage. Okay. This fundamental disadvantage is open sky necessity to have open sky when you are using satellite services. So moreover, it's a major issue with capacity and it will be extremely difficult to service high density cities like Kyiv, New York London with satellite technologies if the number of customers will increase. But at the same time, we see a number of fundamental use cases where we can use satellite technology in order to expand our geographical coverage, to optimize our investments into the geographical coverage to ensure emergency communication for every customer. Okay. Independent from the terrestrial network that is actually under daily attacks from the Russian side.

[Tim Stenovec]

So in other words, that technology can supplement traditional terrestrial cellular technology, but because it doesn't necessarily have the same coverage indoors or in homes, it won't replace it in your view, ever?

[Alexander Komarov]

Yeah. Yes, I think so.

[Tim Stenovec]

So, Alexander, I'm curious about the Ukrainian customer right now and how spending has shifted in recent years as this economy has entered a wartime economy, as different members of of the economy have gone off to fight, come back from fighting, gone off to fight again and that sort of thing. What does your customer base look like specifically in Ukraine Right now

[Alexander Komarov]

the biggest issue is demographic crisis and immigration crisis that we are facing in Ukraine. So we have right now, according to different sources, around 30, 32 million Ukrainians in Ukraine. Okay. And unfortunately it is slowly decreasing because of the war, because of the immigration. As an example, we have on a monthly base around 2 million customers being serviced abroad. These are Ukrainian migrants out who are still connected to the Ukraine through keystar services, with their relatives, with their services in Ukraine, with their state provided services, banking services in Ukraine. Okay. So somehow it's a quite, I would say difficult situation as a result of the constant air attacks, shelling, we see the growing number of double simmers in the country and every blackout is actually driving people to buy extra SIM card in order to stay online and to ensure a certain redundancy from the potential problems. Okay. So somehow it's quite specific market that might be normalized after the war. We expect that share of the Ukrainian migrants will be back. Okay. And this will be a huge economic, I will say, trigger for the future recovery.

[Jamie]

Hey, one thing we wanted to ask you just have about a minute or so left here, Aleksandr, is that our understanding is you also serve customers in Ukraine, of course, as we've been talking about, but also the uae, the United Arab Emirates, is that right? And if so, what can you tell us about what's going on there and what exposure you and your company and really your employees have as a keystar group?

[Alexander Komarov]

We have a very, very, very small exposure as we have a very small office in Dubai. Okay. So this is very much driven by substance and we have just few employees there that are helping us with investment, relationship, corporate affairs and reporting. Okay, okay. So of course you know, people's safety is our number one priority. Everyone is in a remote mode, okay? But somehow we are partially affected even without operations overseas. So all our operations is concentrated in Ukraine and we have right hailing business in Uzbekistan.

[Carol Massar]

All right.

[Jamie]

We wish you well and look forward to hopefully catching up again with you in the future. Good luck with everything. Oleksandr Komarov, he's the President CEO of Kee Star Group, joining us from Kiev, Ukraine on the this Friday.

[Tim Stenovec]

Stay with us. More from Bloomberg businessweek Daily Coming up after this,

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[Ben Walter]

Running a business is hard enough, so why make it harder With a dozen different apps that don't talk to each other. One for sales, another for inventory, a separate one for accounting. Before you know it, you are drowning in software instead of growing your business. This is where Odoo comes in. Odoo is the only business software you'll ever need. It's an all in one fully integrated platform that handles everything CRM, accounting, inventory, E commerce, HR and more. No more app overload, no more juggling logins. Just one seamless system that makes work easier. And the best part, Odoo replaces multiple expensive platforms for a fraction of the cost. It's built to grow with your business whether you are just starting out or already scaling up. Plus it's easy to use, customizable and designed to streamline every process so you can focus on what really matters running your business. Thousands of businesses have made the switch, so why not you try Odoo for [e-mail] that's o-o o.com.

[Bloomberg Announcer]

you're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube on the war.

[Tim Stenovec]

Today's Bloomberg Big Take is A story featured from Bloomberg Business Week, it highlights an excerpt from the forthcoming book Project Maven. It shows how the US enlisted Silicon Valley and its vision for AI warfare that's now playing out in Iran with more. As the author of Project Maven, a Marine colonel, his team and the dawn of AI warfare. Katrina Manson is with us. She's Bloomberg News reporter who covers tech and national security. Once again, congratulations on the book. I mean, the timing of this could not be more perfect given what we've been talking about over the last few weeks, over the last few months and the tech advancement that we've seen with AI just in the last few years. When you get to the book in the history of AI in modern warfare. But first, I want to start with what's happening in Iran and what you've recently been able to find about where AI is being used.

[Katrina Manson]

Very helpfully. CENTCOM has confirmed that they are using a variety of AI tools in their Iran operations. That essentially will mean Maven smart system. So we've reported that Maven smart system is being used. If you imagine a digital interface, something like Google Earth for war, you're beginning to get in the right kind of kind of area. It is something that using computer vision, AI and more than 150 different data feeds that the US can draw on tries to whittle down information. And Centcom confirmed to us, generates points of interest. Now, what's a point of interest? It's everything before a decision to target. So it's all the information you might need. Elevation, location, who's there, what collateral damage might there be? What weapon can we bring to bear. That point of interest becomes a coordinate, that if it becomes a target, they can decide to strike on it. So that's something they're using all the time. And the commander of centcom, most significantly, he's done a couple of video messages that have been out on X and everywhere. In the second one, he also publicly confirmed that they're using AI and that it's helping them speed up processes from what used to take months and days down to seconds.

[Carol Massar]

Wow.

[Jamie]

Are we alone in having this? Can we assume. Katrina, I know this is not. I'm kind of just bringing this on you. Can we assume everybody around the world is working on these kinds of systems?

[Katrina Manson]

The US Is using a platform made by Palantir. This is Maven smart system.

[Tim Stenovec]

Okay.

[Katrina Manson]

That system is available in other scenarios. So what's public is NATO has it. Alex Karp has publicly said allies in the region.

[Tim Stenovec]

Palantir's founder, co, founder, CEO Executive Alex

[Katrina Manson]

Carp has suggested that allies in the region have it. Now. They won't have the same thing that the US has, because what makes the US system special is the data they can draw on. And Palantir doesn't provide that.

[Jamie]

Like with most government things, things have been happening for a while. Project Maven given a little bit, give us a little bit of background and history, because you've been writing out, reporting. You did another big take a couple of years ago. What is it and what was the original mission?

[Katrina Manson]

If you imagine in 2017, the US was deep into the counterterrorism and wars which were meant to be winding down, but were still going. This is the g what the global war on terror. And the US had been fighting this war against jihadis armed with Kalashnikovs and IEDs, which were wreaking terrible injuries and deaths, of course, on the US military. But they were also beginning to think about the rise of China. China's military budget was going up. The US has still by far the biggest military budget going. But China was spending more and more and they hadn't really thought about how to go up against, if ever the need arised, a big Chinese military that was leaning forward in tech. That was what they then called a near peer adversary. Adversary that arguably today is a peer adversary. And so the leaders in the Pentagon started thinking about autonomy and AI and they started this project, Project Maven with a really small scale, narrow aim, which was to bring AI to bear on drone feed video footage. They were leaving drone feed footage on the cutting room floor. No one was really looking at it. They wanted AI to look at it and tell you what was there, but it was always part of a much bigger effort.

[Tim Stenovec]

Palantir, as you mentioned, is behind Project Maven, but you've spent some time reporting on Anthropic, especially with regard to what's happened in the last few weeks with the Department of Defense in the upcoming and the lawsuit there. What are the other companies that are

[Katrina Manson]

involved in this for computer vision, you go to the ones that we use for everything. Microsoft, us. There's a much smaller startup company that's become big partly because of Project Maven called Clarify, that was a startup doing identification of wedding cakes of a bridegroom bouquet. And they switched, thanks to the influence of Project Maven, to starting to identify weapons instead.

[Tim Stenovec]

It's a very big pivot.

[Katrina Manson]

It's a very big pivot and it's partly down to efforts of Project Maven's leaders to reach out to cutting edge technology companies. This is a company that was doing fantastically well at image recognition, in image recognition competitions. Kind of came out of nowhere, I think, to the brains of the person leading it, Matt Zeiler, and convinced him he had no military background at all. He was living in New York to start bringing his technology to bear on difficult US national security problems, knowing that it would be controversial, but believing in the mission.

[Jamie]

You know, one of the things in your book, and it's a I don't know that I have time to do. But you say the department's efforts to build an AI enabled fleet of drones that can attack by air and sea have been marked by false starts, missed deadlines, strategic incoherence, and officials are already looking past the Middle east to a potentially bigger conflict. As one person familiar with US operation puts it, quote, iran is an amazing precursor to what could happen with China over Taiwan. Is that the target? Like, how do you. I don't know, how do you process? How should we process?

[Katrina Manson]

So the US has said publicly that they believe China wants the capability to take Taiwan militarily by 2027. So that's become a very tough deadline for the US military to make sure they have the capability to defend Taiwan. Really importantly, the US doesn't say if it will or won't defend Taiwan. That's a policy of strategic ambiguity, they call it. But to defend an island, it's hard to take it militarily if China wanted to take it, but it's also hard to. To defend. And so for a while now, the US has been developing various ideas that they don't say much about in public, but they give us hints. One of those ideas is something called Hellscape, which is that the admiral who leads US forces in the Indo Pacific has said we'd buy him time so they would put autonomous weaponry out there, drones, to stop any Chinese invasion, buy him time for a month and then bring in the bigger, the bigger defensive beasts. I have been trying to work out, well, what does that mean? What do those drones look like? And can they operate autonomously? That's important because things can get shot down.

[Jamie]

I just want to know more. And you're going to come back. I know the book is.

[Tim Stenovec]

We can buy the book too.

[Jamie]

It's out.

[Katrina Manson]

It's out March 24, but apparently it's already in bookshops.

[Jamie]

Okay, good stuff. You're going to come back. Congratulations. And we want to know more. Katrina Manson Bloomberg News Reporter this is

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[Carol Massar]

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