Matthew Key, CEO of Telefonica’s Digital division, says mobile operators must invest in innovation, because they are becoming “commoditized” and their relevance to customers is “decreasing.” That is unusually frank talk from a mobile service provider executive, but likely is “permissible” because Telefonica already has taken steps to create a new “innovation” unit to address the problems.

Key said mobile operators must “change the business model” otherwise they will soon become “irrelevant” as customers increasingly use services such as Skype, BlackBerry Messenger and WhatsApp, which allow them to communicate without spending money on texts or voice calls.

“The ecosystem is changing, our relevance to customers is decreasing, we have to admit that,” he said. Of course, that’s precisely why Telefonica, which owns mobile operator O2, set up the new “Digital” division in September 2011, to develop new products and services that create new customer value.

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