O2 owner pins digital growth hopes on new London HQ

Telefonica is to make London the headquarters of its newly formed digital business unit, responsible for the company's digital video and entertainment, e-health and cloud businesses.

Telefonica, owner of O2, is to set up a newly formed digital business unit in London. Photo credit: Starphysh/Flickr

The unit, called Telefonica Digital, is the result of an internal reshuffle and will co-ordinate around 2,500 employees, Telefonica — O2's parent company — said in an announcement on Monday. The London HQ will oversee regional offices in Madrid, Sao Paulo, Silicon Valley and "certain strategic hubs" in Asia.

"Telefonica is embarking on a new era with eyes set on the medium- and long-term future with the aim of reinforcing its growth story, actively participating in the digital world and capturing the most of the opportunities afforded by its global scale and industrial alliances," it said in a statement.

As well as being responsible for video, e-health and cloud, the digital unit will also attempt to drive growth in e-advertising and machine-to-machine (M2M) communication, and will be guided by a nine-person executive committee.

The London base will be headed by Matthew Key, chief executive of Telefonica O2 Europe, and "will largely be a culmination of existing R&D, new business, and venture capital functions across the current Telefonica group globally", an O2 spokesman told ZDNet UK on Tuesday.

The company "anticipates that some new roles will be created in London". However, it said that it was too early to give a breakdown of further roles within the new unit. The spokesman added that many of the existing roles are expected to remain in their existing territories.

Telefonica hopes that the new structure will allow it to take advantage of economies of scale and provide better potential for growth within the digital sector. It will also help to "streamline the organisation" and speed up the decision-making process, the company said.

However, John Delaney, research director of consumer mobile at IDC, described the decision as a "bold move".

"Telefonica's elevation of digital business development to the status of an organisational division is a bold move, devoting substantial corporate resources to the pursuit of some rather speculative opportunities," Delaney said. "It reflects a recognition by Telefonica that telecoms can no longer be relied upon to provide long-term growth."