Setting the stage for a mobile revolution

3 Jul 2008

Mad TV iPhone video

The iPhone has changed mobile forever, says O2 Europe CEO, Matthew Key

Twenty years ago, except for the odd businessman hefting a machine the size of a briefcase, few people in the world had mobile phones. Today, some three billion out of the world’s population of 5.5 billion people carry a mobile communications device.

The importance of this revolution is not lost on Matthew Key, the man at the helm of one of Europe’s largest mobile operators, O2.

On 11 July, Key will oversee the launch of the iconic Apple iPhone 3G across several European markets, including Ireland and the UK where the company has exclusive rights to sell the product.

Key is also head of European operations at Telefonica, the largest telecoms operator in the region, with a market capitalisation of €126.6bn and a 20pc market share of all European telecoms connections. The company also has a 30pc market share of all telecoms across the US.

Globally Telefonica has some 233 million customers, up 12pc on last year. In recent years, the company fuelled growth through an acquisition spree that saw it buy O2 in 2006, as well as stakes in Telecom Italia, BellSouth across Latin America and China Netcom.

Global chief executive and chairman, Cesar Alierta, says further acquisitions and investments will be funded by 37pc of market cap – some €40bn – which will be generated over the next three years.

Key, who has managed the smooth transition of O2 into the Telefonica family, stands in a crowded room overlooking the 200,000sq ft, futuristic-looking Telefonica headquarters in Madrid.

“The first thing I’ll say is when you look at the iPhone and what its done is it has set a bar for all phone manufacturers. It has encouraged other manufacturers to produce better devices.

“One of the most interesting things about the iPhone is its usage reflects PC usage, not mobile phone usage. When you look at the top five sites visited by the iPhone browser, they’re PC sites, not mobile.

“When I walk in the door my iPhone is immediately seized by one of my children because we’ve two PCs and three children. It becomes the third computer at home because they can connect to YouTube via the wireless LAN and get broadband speeds.”

Key says some of the potential services and products to emerge from the iPhone have yet to be realised, but when they are, operators like O2 will pounce.

One of the biggest opportunities the iPhone 3G will offer operators like O2 is the ability to target the business world with enterprise services. According to analyst firm Gartner, over 25pc of Fortune 500 companies are road-testing the device for corporate use and email messaging.

“Everybody is under-estimating the potential impact of the iPhone Software Development Kit (SDK) because businesses will be able to develop their own software for their sales force or office-based colleagues. The great thing is the quality of the graphics means you can send out a sales performance chart, for example.”

Asked about O2’s mobile broadband plans, Key observes that Ireland’s fixed broadband market is currently underdeveloped. “That’s one of the reasons we moved relatively quickly. Fixed broadband is underdeveloped and we need to move faster on mobile broadband.

“Our experience at the moment is that mobile broadband is an incremental purchase. Fixed broadband tends to be a household purchase, whereas mobile broadband is a personal purchase. But in countries like Ireland, because fixed broadband is underdeveloped, people are using mobile broadband for home broadband.”

As far as Key is concerned, the world is only at the start of a mobile revolution that will see operators like O2 provide additional services as voice revenues decline, such as software applications, video games, music, film, TV and advertising.

“If you go back 20 years the mobile basically didn’t exist and how many mobile phones are in the world today? And we’re actually just started in terms of what people are using them for.”

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years