In an announcement in London on Thursday, the Spanish company, faced with turmoil in its core markets and witnessing turbulence in mobile sales all over Europe, seems to be pinning its future on its internet-focused arm, Telefónica Digital.
Digital CEO Matthew Key (previously head of Telefónica’s U.K. network, O2) suggested the company’s future may lay in a range of offerings that go well beyond mere mobile services — including cloud computing and the Internet of Things.
If it does it right, said Key, the division could drive up to €5 billion ($6.2 billion) in revenue by 2015, double its current size. That’s still only around 10 percent of the entire company’s business, but it could prove significantly more valuable than the fickle mobile market.
So what are they actually talking about?
Here’s a basic outline of what it’s up to:
More billing from your phone
A series of global agreements with technology and internet companies, including Google, Facebook, Microsoft and RIM, mean that Telefonica customers will now be able to use direct billing to buy goods and services. That gives people the chance to purchase items inside a Facebook game, or apps on Android, Windows Phone and BlackBerry without ever having to set up a billing service with those individual companies.
Telefonica made its aim here particularly clear, mentioning the fact that 60 percent of customers in South America (where the company is particularly strong) don’t have a bank account — but they do have a phone.
More support for Mozilla
In an attempt to unshackle its fortunes from systems like Android and iOS that it can exert very little control over, the company has already worked with Mozilla on its Firefox OS (formerly known as Boot 2 Gecko). That collaboration will continue, and Telefonica plans to launch its first devices running the system next year.
Global expansion and partnerships
As Western markets reach saturation and struggle with the fact that their growth in the past has been built in large part on flimsy economic structures, Telefónica Digital sees great value in younger, expanding markets like Brazil and the Middle East. To capitalize on those regions it will be working with Etisalat, the telco based in the United Arab Emirates, to partner on a number of initiatives including machine-to-machine networking. At the same time it said it plans to pump millions into Brazil’s digital advertising market to help it expand rapidly.
So will the company succeed? Telefónica boss Cesar Alierta admitted to Businessweek that “the forecast for digital isn’t easy” but it’s also a matter of evolution not revolution: the company is not claiming any of these individual areas will be slam dunks, but will grow above market rates over the next few years.
And let’s be honest, the company has got little to lose by pushing harder in digital: over the last year it saw profits drop by an astonishing 47 percent. Whatever it can find to plug the hole will surely be welcome.