In What Appears To Be A Master Stroke, Hutchinson Whampoa Buys Italy’s Canale 7 National TV Broadcaster And Thus Its Own DVB-H Mobile TV Platform

And so the European television scene changes yet again. Hong-Kong-based Hutchinson Whampoa, operator of the 3G “3 Italia” service in Italy now becomes the first mobile operator to buy a TV station. Just last month the German car manufacturer Audi started a 24-hour digital channel devoted to promoting Audi automobiles, claiming it was the first brand-specific entertainment channel in Europe.

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Hutchinson is said to be paying some €35 million for Canale 7 – a mere drop in the ocean compared to the €9 billion it has invested in its Italian 3G UMTS network since winning an Italian license in 2000. The company currently has about 4.8 million subscribers in Italy.

DVB-H technology allows mobile users to watch programs transmitted directly from TV towers -- far less expensive to transmit than on relay from the local telecom that is used for the UMTS system..

The Hutchison Whampoa Group is the primary shareholder of 3 Italia with 94.5%. Other shareholders are NHS Investments, RCS Mediagroup, Gemina and 3G Mobile Investments (Franco Bernabe Group). The group had hoped to launch an IPO this year, but with the Canale 7 purchase that will now be postponed until early next year.

Mobile phone penetration in Italy is around 95% with some 55 million subscriptions out of a population of around 58 million. The number of phones is so high because many Italians have more than one mobile account – one certainly doesn’t want one’s SMS love notes to someone other than one’s spouse being read in memory on the phone brought home and that is not as much of a joke as you may think it is! The vast majority of phones are on pre-paid systems.

One of the first things one notices when visiting Italy these days is how it appears, with little exaggeration, that so many people are using their mobile phones almost continually – not just to make and receive voice calls, but for SMS, to send still pictures and video, and to receive news and information services.

Sit in a meeting and unless the mobiles are ordered off someone’s will surely ring every couple of minutes. And if they are not ringing you can spot the owner looking to see what caused the latest news and information alert beep. For information vendors, Italy ranks right at the top in Europe for revenues produced from mobile phone services.

3 Italia is expected to offer DVB-H service from the second half of 2006, integrating its UMTS network to create a DVB-H network of about 20 channels. Although Canale 7 was considered a regional network, it broadcast primarily in the rich northern half of the country on its current analog service. With the digital license it should be able to cover about 70% of the country.

Mediaset, Italy’s largest private broadcaster says it has already agreed a programming deal with 3 Italia that is awaiting signature. It already provides programming to 3 Italia’s main competitor, Telecom Italia.

Telecom Italia, incidentally, expressed true “sour grapes” about the Canale 7 purchase. La Repubblica quoted Telecom Italia’s Chairman Marco Tronchetti saying, “It worries me if a Chinese company starts to buy broadcasting frequencies in our market and loses billions without acting with an economic logic.”

3 Italia has also been active signing other deals – it recently penned a five-year agreement with Ericsson for hosted ringback tones, based on the Swedish company’s Personalized Greeting Service. Ringback tones are tunes or other sound bites that replace the standard tone callers hear as they wait for their calls to be answered.

The really unanswered question is whether people consider the small mobile phone screen suitable to watch television. Preliminary evidence would support that live news or sporting events might garner the most favor. On the Pope’s death, for instance, 3 Italia broadcasts were received on 3 million mobile phones!