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Hutchison Whampoa unit 3 Italia and Telecom Italia reportedly held talks on a merger but the two parties unable to reach a conclusion. 3 Italia’s Chief Executive, Vincenzo Novari, said, the prospective deal broke down on price and market competition issues. “There were differences on the share swap ratio. The value attributed to the Telecom Italia shares was too high for us. The difference has stopped the operation,” Novari added.

Novari Further said, there were four options for the future of 3 Italia, which operates a third generation mobile telephone network, including videotelephony and handheld TV.

One is the merger with Telecom Italia, which would include Italy’s telecom operator Wind taking over 3 Italia customers and technology. According to Novari it was “the least probable” option.

The other options available are a sale to a Middle East sovereign fund, the sale to a non-European operator of a 50 percent stake in H3G, the company which owns the 3 brand, and 3 Italia continuing as an independent company, he added.
He has excluded the possibility of “a break-up” of 3 Italia, along the lines of Italy’s Blu telecom operator in 2002, which saw its assets such as tax losses, radio frequencies and subscribers going to different rivals.

If 3 Italia is thinking in- line of break-up of the activities, they will not launch new initiatives, said Novari.

Hutchison, operating its mobile services in several countries under the 3 brand has set up handset unit called INQ Mobile. The company is also planning to roll out its first mobile handset in UK and Australia before the end of this year. It is anticipated that the phone will be offered to other mobile operators by next year as well. With the introduction of new phone the comapny seeks to convince consumers to use more web-based services on the mobile phone which would increase data usage. Qualcomm chips will be used in INQ handsets and manufactured by contract manufacturers such as Flextronics and Foxconn.

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Hutchison Whampoa posted a 63% drop in first-half earnings, yet able to beat the expectations and credit goes to shrinking telecom losses and better income from its energy and port businesses. Net income for the six months ended June 30 reportedly was HK$10.69 billion compared with HK$28.76 billion in the same period last year.  But the revenue raises 24% to HK$176.2 billion, report reveals. Analysts had anticipated that the company will post half-year earnings below HK$10 billion. Li, Hutchison’s chairman, argued that the company could fare well even in tough economic times because it operated in so many locations. Though the company was supported by its 3G mobile business, known as the 3 Group.

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Property-to-telecoms conglomerate Hutchison Whampoa announced this morning that it has raised its ownership of Hutchison Telecommunications Holdings to just over 50%, to better capture growth opportunities in the international telecom firm’s existing markets. Hutchison said in a statement its stake in Hutchison Telecommunications had increased from 49.75% to 50.0036%. The group bought twelve million Hutchison Telecommunications shares, or 0.251% of its issued share capital, between 6-14 June.

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Hutchison Telecommunications (Australia) said Friday its shareholders approved plans to raise A$2.85 (US$2.35) billion via a renouncable rights issue of convertible preference shares.

Under the proposed issue, shareholders will be offered 20 convertible preference shares for every share they hold, at 21 Australian cents each.

The offering is strongly supported by Hutchison Whampoa, Hutchison’s majority shareholder.

Depending of the takeup by minority shareholders, Hutchison Whampoa could end up with as much as 97.7% of Hutchison Australia. However, it has indicated it wants to maintain a listing on the Australian Stock Exchange.

Indiatimes writes…Some of the Europe’s biggest telecommunications groups are joining hands to create a mobile phone search engine that could challenge the internet giant Yahoo and Google, according to a report in Sunday Telegraph.

Vodafone, France Telecom, Telefonica, Deutsche Telekom, Hutchison Whampoa, Telecom Italia and one American network, Cingular, are among the companies that will come together for secret, high-level talks at the mobile industry’s biggest annual trade show in Barcelona next week said the report.

Faced with declining revenues as calls become cheaper, network operators are determined to secure a large slice of the lucrative search advertising market, the report said.

In the UK alone, more than 20% of subscribers are expected to have access to mobile Internet at broadband speeds by the end of 2007, which should prompt a dramatic increase in the use of search engines via mobile phones, the report said.

The initiative may surprise the two internet companies, Google and Yahoo, which deals with mobile operators and handset makers, the report said.

However, the mobile industry has increasingly started to feel that it can retain a greater share of advertising revenues by developing its own service. A joint approach is essential, because mobile networks will need to offer advertisers a large audience if they are to challenge the US search giants.

The four big operators in Britain, Orange, owned by France Telecom, O2, part of Spain’s Telefonica, Deutsche Telekom’s
T-Mobile and Vodafone will all be represented at the meeting next week, the report said.

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Economictimes writes…Some of the Europe’s biggest telecommunications groups are joining hands to create a mobile phone search engine that could challenge the internet giant Yahoo and Google, according to a report in Sunday Telegraph.

Vodafone, France Telecom, Telefonica, Deutsche Telekom, Hutchison Whampoa, Telecom Italia and one American network, Cingular, are among the companies that will come together for secret, high-level talks at the mobile industry’s biggest annual trade show in Barcelona next week said the report.

Faced with declining revenues as calls become cheaper, network operators are determined to secure a large slice of the lucrative search advertising market, the report said.

In the UK alone, more than 20% of subscribers are expected to have access to mobile Internet at broadband speeds by the end of 2007, which should prompt a dramatic increase in the use of search engines via mobile phones, the report said.

The initiative may surprise the two internet companies, Google and Yahoo, which deals with mobile operators and handset makers, the report said.

However, the mobile industry has increasingly started to feel that it can retain a greater share of advertising revenues by developing its own service. A joint approach is essential, because mobile networks will need to offer advertisers a large audience if they are to challenge the US search giants.

The four big operators in Britain, Orange, owned by France Telecom, O2, part of Spain’s Telefonica, Deutsche Telekom’s
T-Mobile and Vodafone will all be represented at the meeting next week, the report said.

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WirelessWeek writes…Tired of losing mobile ad revenue to Google and Yahoo!, seven GSM operators have joined forces to create their own mobile search engine. The seven operators are Cingular, Deutsche Telekom, France Telecom, Hutchison Whampoa, Telecom Italia, Telefonica and Vodafone.

The consortium looks to succeed where others, such as Microsoft, have failed. Google continues to reign as the undisputed king of Internet search. It has announced plans to include ad links in mobile search results, which the search giant claims will make its search services profitable by 2008.

Given the operators’ tendencies to create “walled garden� approaches to content, there’s doubt as to whether the operator consortium can pull off a victory. With seven different businesses participating in this project, it is unclear if they’ll develop one engine that is white-labeled to each brand or create an advertising clearinghouse that search services could use to access subscribers.

Another question is how manufacturer agreements will be handled. For example, many device makers already choose to pre-install Google or Yahoo! services (such as OneSearch) on handsets. This could create a conflict with the business model that emerges from the operators’ mobile search engine.

Industry experts question whether this service is even necessary. Many browser- and mobile Web-enabled devices can search directly from Google or Yahoo!’s home pages.

However, what isn’t being questioned is that the carriers need this source of revenue. Profits already are being squeezed by loss of voice revenue, especially in the face of competition from VoIP providers such as Skype and Vonage.

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Telegeography writes…British broadsheet the Sunday Telegraph reported yesterday that some of Europe’s biggest telecoms groups are planning to create a wireless search engine that could challenge the likes of Yahoo! and Google. Vodafone, France Telecom, Telefonica, Deutsche Telekom, Hutchison Whampoa, Telecom Italia and US-based Cingular are among the companies that are expected to hold secret high-level talks next week at 3GSM, the mobile industry’s largest annual trade show in Barcelona. The move is predicated by declining call revenues, which in turn is driving cellcos together to compete against Google and Yahoo!. Faced with falling turnover, network operators are determined to secure a larger slice of the lucrative search advertising market. The Telegraph report adds that the networks may decide to go with an existing search engine and use their combined might to secure a majority slice of the income or instead create a white label service, with a single advertising sales house and technical team, to which mobile networks could then apply their own brand. It is not clear what the implications are for existing deals between networks and the big US search companies. Google has already signed up Vodafone and T-Mobile, as well as Hutchison’s 3 and China Mobile. Its service also comes pre-loaded on handsets made by companies including Samsung. Yahoo! has existing deals with Vodafone and 3, and is already featuring sponsored links.

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Iht writes…A bidding war appears set to unfold in coming weeks as Vodafone prepares to make a formal offer to buy a leading Indian cell carrier, a potential acquisition that has drawn the attention of several other high-profile mobile phone companies and private equity firms.

The bid for Hong Kong-based Hutchison Whampoa’s controlling stake in India’s Hutchison Essar Ltd. is important to Vodafone as it helps the British carrier gain a presence in one of the world’s fastest growing markets: India is now adding 5 million new mobile phone connections every month, more than China.

For now, Vodafone’s biggest competition for the prize is Reliance Communications Ltd., India’s second-largest mobile phone company, which would become the market leader if its plans to acquire Hutchison Essar, which is unlisted, come through.

Vodafone’s move is also strategic for its Chief Executive Arun Sarin, who has come under fire from shareholders for lackluster share prices and criticism that the world’s largest mobile phone company lacks a credible strategy for further growth.

So, a week after the company made its interest public, Sarin — whose family’s roots are in India — flew to New Delhi to hold talks with top government officials and potential partners.

Winning the confidence of government officials is crucial to such deals in India, where ministers and politicians have a reputation of meddling in merger and acquisitions, especially when foreign companies are involved.

“When it happens, it will be a large transaction. We would like it to be smooth,” Sarin told reporters after a meeting last week with Indian Finance Minister P. Chidambaram.

Vodafone emerged as a front runner earlier this month after making an approach that reportedly valued all of Hutchison Essar at between US$17 billion (€13.2 billion) and US$18 billion (€14 billion), which would make it the biggest-ever corporate takeover in Indian history.

Sarin said his company plans to make a formal takeover offer in early February.

A bidding war appears inevitable, however.

Hours after Sarin’s meetings with Indian officials last Wednesday, the board of Reliance Communications authorized its chairman, Anil Ambani, to raise funds and “take all necessary steps” to counter Vodafone.

A day later, Ambani, one of India’s most influential businessmen, met most of the officials who had held talks earlier with Sarin.

Reliance Communications’ current market share is close to 20 percent and most of its phones are based on CDMA technology. The company wants to scale up its cellular phone services based on GSM — the other dominant technology — which is what Hutchison-Essar offers to nearly 20 million customers.

Media reports have said Reliance Communications could come with a bid that values all of Hutchison Essar at about US$20 billion (€15 billion).

“They are going to do what it takes to get it,” said Romil Shetty, a telecommunications analyst with the consulting firm KPMG.

“At the moment, it seems to be Vodafone vs. Reliance, but there are some more companies that might get into the fray later,” Shetty said.

Among other interested parties are Malaysia’s Maxis Communications Bhd. and the Hinduja brothers — Britain-based Indian businessmen who previously held a stake in Hutchison Essar.

Media reports have said several high profile private equity firms, including U.S.-based Texas Pacific Group and Blackstone Group, have also been exploring tie-ups with possible bidders.

Besides rival bidders, Vodafone must be ready to wade through complex Indian rules and regulations, including a 74 percent cap on foreign investment in telecom ventures.

In the case of Hutchison Essar, the story gets further complicated because of the number of stakeholders involved.

Hong Kong-based Hutchison Whampoa holds 52 percent stake in the company, while its India-based associates hold 15 percent. Hutchison Whampoa wants to sell out and its associates have said they are ready to tag along.

India’s Essar Group holds the remaining 33 percent and it isn’t clear if it would like to sell its stake or join up with the company that buys Hutchison Whampoa’s stake.

Some media reports have said Essar believes it has the first right to buy Hutchison’s shares in the joint venture and that the company would try to make most out of the situation, either by buying out Hutchison’s stake or getting a good price to sell out completely.

Shetty believes Essar is ready to get a good price and get out. “I don’t think they are serious about staying in the telecom business,” he said.

During his visit, Sarin sought to preempt any potential trouble from Essar by calling it is a “natural ally” in the transaction.

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