UPDATE: Skype, Hutchison Whampoa's 3 Launch Skypephone
LONDON -(Dow Jones)- Hutchison Whampoa- owned mobile phone operator 3 and internet company Skype Monday unveiled a handset that allows customers to make free internet calls outside of the home, saying they hope to sell "millions" over the next few years.
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3 Skypephone
3, and eBay-owned Skype hope to boost their fortunes by selling "several hundred of thousand" of the 3G Skypephones during the fourth-quarter and millions over the next few years. The phone will allow Skype's 246 million registered users to call and instant message each other for free.
The phone will be available on Friday in the U.K., starting from GBP49.99 on a pay-as-you-go tariff, and will also launch in Australia, Austria, Denmark, Hong Kong, Italy, Macau and Sweden before Christmas.
Until now, most Skype calls have been made from computers attached to fixed-line internet connections, with most mobile operators reluctant to allow Skype on their phone networks on concerns that voice revenues will be eroded.
However, the two companies have been working together over the last year, providing a Skype application for 3's X-Series platform. In addition, the U.K.'s fifth-largest mobile phone operator, which has yet to make a profit, has also looked to attract more customers by introducing cheaper tariffs and flat-rate data services.
3 will pay Skype royalties based on the number of active users of the service, without giving more details.
"The bigger operators, such as Vodafone, T-Mobile and Orange, have all taken flak recently for alleged hostility towards customers using VoIP on their networks," said John Delaney, a telecommunications analyst at U.K.-based research company Ovum.
"That this initiative is being taken by 3 is no coincidence, of course. As the smallest and newest of the U.K. mobile operators, 3's best hope for growth is to disrupt the status quo wherever it can," he said.
A dedicated Skype mobile phone will improve how internet telephony integrates with mobile networks, said Skype Chief Executive Michael van Swaaij on a call with journalists Monday. The phone, developed with Qualcomm and Chinese handset maker Amoi Electronics, has a Skype button that immediately connects Skype users to their contact list, and who on the list is available to take a call.
3's UK Chief Executive Kevin Russell said that due to the cheap pricing of the phone, he hopes to make internet telephony more appealing to the mass market. Until now the company's X-Series program, which aims to push data usage through a number of multimedia partnerships, has struggled to gain traction as it's focused on higher-price devices.
Russell said he hopes to boost customer numbers through the low-priced phone and reduce the cost of customer acquisition.
"Strategically, we believe it's exciting," said Russell, saying that in the same way 3's flat-rate data tariff has led to other operators following suit, the same could happen with voice.
"There's been some internet based behavior by some people in the industry that has been trying to hold back the tide. We will be watching with quite a lot of interest," said Russell.
Hutchison Whampoa Group Finance Director Frank Sixt said that he expects the phone - which has 3G multimedia capabilities, an MP3 music player and 2-megapixel camera - to sell by the hundred of thousands of units in the fourth quarter, and over the next few years he hopes to extend that into the millions. In a separate press conference in Milan, 3 said it expects to sell more than 100,000 phones in Italy by the end of 2008.
However, Ovum's Delaney questioned the long-term strategy of the service. "In the short term, 3 may be able to use the Skypephone effectively to boost its subscriber numbers. In the long term, though, if 3 is successful with the Skypephone, the X-Series and similar projects, it might end up creating its own strategic problems," he said.
If 3 customers make phone calls via Skype, Hotmail for messaging, Google for search and YouTube for television, the operator could be undermining its position as a service provider, said Delaney.
"What do you need your mobile operator for? The answer could turn out to be: subsidising phones, carrying data packets, and dealing with problems and complaints. Does that add up to an attractive business?" questioned Delaney.
In addition, Skype will not offer its SkypeOut feature, which allows customers to make cheaper-than-average calls to non-Skype phone users, until next year. Instead customers will use 3's mobile phone network to do this. Customers trying to use the Skype service in countries where 3 doesn't have a presence will have to pay normal international data tariffs, potentially making it cheaper to use normal voice telephony instead of Skype.
3 will sell Skypephones exclusively in the markets in which it operates, with the two companies looking to sign deals with mobile phone operators in other regions.
Hutchison's U.K. business, which paid out GBP4.4 billion to the U.K. government for a 3G phone license in 2000, cut its financial losses in 2006 by 66%, to GBP464.3 million from GBP1.37 billion. The company is working on a number of initiatives, including a reduction in both retail costs and customer acquisition costs, to become profitable.
Earlier this month Skype pushed its online auction parent company eBay into the red, after it had to write down $900 million on Skype's value, after buying the company in October 2005 for $2.6 billion.
-By Daniel Thomas, Dow Jones Newswires; 44-20-7842-9264; dan.thomas@dowjones.com
(Giada Zampano in Milan and Jessica Hodgson in London contributed to this article.)
(END) Dow Jones Newswires
Posted to the site on 29th October 2007