Telefónica Sees Huge Upside in M2M, Carrier Billing

Telefónica might be a bit optimistic, but the firm believes it can generate annual revenues of €5 billion (US$6.2 billion) by 2015 from initiatives that leverage the carrier's billing and charging capabilities as well as machine-to-machine services.

Those are important assertions for one principal reason. When a tier-one service provider decides to target its human and financial resources to a new revenue growth initiative, scale matters. In other words, a large telco cannot afford to waste time chasing small revenue opportunities, but has to look for opportunities that make a difference.

The shorthand way you can think about it is that when a service provider earns scores of billions worth of revenue each year, small opportunities do not “move the revenue needle” enough to be worth pursuing. As a very-simple rule of thumb, a tier-one service provider has to look for opportunities that generate at least a billion dollars a year.

Telefónica Digital believes its new global "Direct to Bill" agreements with Facebook , Google , Microsoft Corp. and Research In Motion Ltd. will do so.

Those deals allowTelefónica customers to buy content and services from Facebook, Google, Microsoft and RIM application stores, for example, using their mobile accounts. The charges appear directly on the subscriber phone bills, and do not require use of credit cards.

The operator believes this could prove very popular in Latin America, where, according to Telefónica, "credit card penetration is low and 60 percent of the population do not have bank accounts."

Telefónica also has entered a strategic partnership with service provider Etisalat that extends Telefónica's M2M reach into 17 new countries (in Africa, Asia/Pacific and the Middle East). The two operators plan to "jointly develop business opportunities in Machine-to-Machine (M2M), financial services, cloud computing, eHealth, mobile advertising and over-the-top [OTT] communications."