You can tell Telefónica Digital, the recently formed business unit of Europe’s largest operator, is different.

“My bonus is based not on financial parameters, but on product development,” said CEO Matthew Key in his keynote at the company’s press and analyst day in London.

TD was formed last September to develop new products and services across seven key segments – financial services, M2M, eHealth, advertising, video & media, security and cloud computing.

While the first few months of its existence were spent unveiling partnerships – with Joyent and Intel in cloud, OnStar and Avea in M2M, Boku in m-payments and EA in m-gaming – it is now starting to deliver genuine products.

TU Me, its OTT communication app designed to fight back against the likes of WhatsApp and Viber, launched in May and has since gained 250,000 users in over 100 countries the company revealed.

Its latest product, TU Go, is due out at the end of this year in the UK and allows customers to use their voice minutes and SMS packages on any device or platform – not just their phone.

In short, Telefónica customers can use their phone number “as an app” by installing TU Go on a tablet or PC and using it like a phone.

“We have seen a change in customer behaviour and people now want to communicate across platforms,” said Stephen Shurrock, TD’s global CCO.

Jamie Finn, director of communications product design, added that the company needed to give people a reason to use TD’s products.

“Skype is on 600 million computers – we’re not,” he said.

Although innovative from a telco perspective, these products are also necessarily defensive; their primary aim is to reduce churn rather than to drive revenue.

The company has no immediate plans to look to monetize such services, according to Shurrock.

“But we could,” he added, citing areas such as advertising and digital goods.

While such plans seem to be for the distant future, a more likely scenario is that the they will look to roll out the TU brand into the enterprise space.

“I see a product for SMEs in the future,” confirmed Shurrock.

So how is the company going to attain Key’s aim of 20 percent annual growth leading to revenues of €5 billion in 2015?

On Friday, the company announced it was extending its partnership with Visa Europe in m-payments space, with the financial services firm becoming TD’s preferred partner.

Both companies will co-invest in the development products and services in mobile wallet, contactless payments (NFC), acquirer services for mobile point of sale, and merchant offers.

“This market has enormous untapped potential and through this partnership with Visa Europe we aim to unlock significant new business opportunities,” said Joaquin Mata, TD’s director of financial services.

This builds on Thursday’s news that TD now has global framework agreements with Facebook, Google, Microsoft and RiM in place to offer direct-to-bill m-payments.

As we also report today, TD has also extended it partnership with Middle Eastern operator Etisalat as looks to develop scale through licensing.

It will also hope to see some financial benefit in Latin America from its partnership with Mozilla as it attempts to reduce the dominance of Android.

The HTML5-based Firefox OS, which has now brought hardware developers TCL and ZTE on board to manufacture phones, is backed by Deutsche Telekom, Etisalat, Smart, Sprint, Telecom Italia and Telenor and will come to market next year.

Given the short timeframe, TD can only be applauded for its work so far.

“Our operating model is different to a traditional telco,” said Key.

“We will develop our own platforms but if we can’t then we will partner, buy or invest in those that can – innovation is king.”

As we reported earlier week , rivals are sceptical about whether TD has taken the right approach.

Whether it is too late to make any meaningful impact is also a question that will only be answered in the fullness of time.

Hiring the right staff is a further challenge.

But there is no doubt that in Europe’s struggling operator community, with perhaps the honourable exception of Telenor, TD is giving itself the best possible chance of succeeding in the digital future – and giving their CEO a healthy bonus in the process.


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