Telefónica’s big data monetisation chief has revealed he would have preferred a smaller market than China as the Spain-based operator looks to entice others to use its technology to generate revenues from mobile subscribers.
Telefónica and China Unicom announced yesterday that they are launching a joint venture in China to sell annoymised data to a range of companies.
Telefónica is supplying its Smart Steps tech to the JV, which will use it to create bespoke data about China Unicom's 287 million mobile customers and then sell it to the transport, real estate and government sectors in the world’s second largest economy.
Speaking to European Communications, Phil Douty, Director BI & Big Data Monetisation at Telefónica, described the deal as “enormously significant” to the Spain-based operator and “a happy marriage of capabilities”.
But he added: “If I’m brutally honest [China] wouldn’t have been first deal I’d have wanted to pull off. Ideally, I would have wanted somewhere slightly smaller but this deal progressed the quickest.”
After a troubled start when it had to be withdrawn in Germany over privacy concerns, Smart Steps was refocused away from the retail sector in 2014.
Douty says his brief is still to roll it out across Telefónica’s opcos, but also to persuade other telcos to deploy it as they struggle to come up with their own tech to monetise proprietary data.
Deals with other telcos should be announced this year, according to Douty.
In the meantime, it needs to make a success of the JV in China.
Douty said the new entity is now in the process of recruiting staff and processing data.
Once fully established, he said the JV should employ several hundred people, mainly in “take-to-market” roles.
Telefónica will supply just a handful of staff.
Douty said he is hopeful that the first commercial contracts will be signed before the summer and described the potential market opportunity as being worth “hundreds of millions of euros”.
The barriers operators face in monetising data are myriad.
On the privacy front, Douty said the regulatory situation in China was “surprisingly similar to elsewhere”.
A major detail is that data is not allowed outside of the country, so Telefónica has created a replica of Smart Steps specifically for China.
The basic platform has not had to be tweaked for its new environment “at the moment” although Douty says Telefónica has “expectations” that new use cases will be developed that can be deployed elsewhere.
Other challenges that operators need to overcome to generate revenue typically include getting access to data from their legacy, siloed infrastructure.
Douty says there is no great difference between China Unicom’s structure and that of his own company.
“My impression is that they are still siloed so not dissimilar but there is a stronger central directive,” he explained.
The biggest challenge to the JV’s success is the “very different” commercial landscape in China, Douty says.
In some cases, Smart Steps aims to replace the traditional surveys that companies would rely on to gain an understanding of their customers.
Douty said that because labour costs are considerably lower in China, the cost savings that Smart Steps promises would be lower.
In turn, the strength and quality of the insights the tech provides will be under greater scrutiny and should serve as a bellwether for others.
All told, the challenges to monetising data remain significant – even for a market lead such as Telefónica.
Many other operators have been put off by the effort required to make it work – BT said it was not a short-term goal – and Douty could well find success if the China project goes well.
He admits monetising data is a “harder slog” compared to using it to improve internal processes as it requires “a lot” of resource.
“Hence lot of telcos talking to us,” he says. “The insights that can be created are still are as exciting as they were [a few years ago].”