VoIP is an application that should be embraced by mobile operators and not treated as a threat, according to Ronan Dunne, CEO of Telefónica Europe plc (O2) 's U.K. operation.

O2 UK has just started a trial of its O2 Connect service that allows its Android and iOS smartphone customers to make voice calls and send texts over Wi-Fi connections using an application based on Jajah IP app capabilities acquired by Telefónica SA (NYSE: TEF) in 2009. (See O2 Trials VoIP Service, Euronews: Telefonica Goes After Skype and Telefónica Buys VoIP Player Jajah.)

So what's the plan behind this move?

"We set ourselves the challenge of being the unique communications partner for our customers, so when we saw VoIP arriving we had two choices -- close our eyes like others do and see VoIP as the devil incarnate, or embrace it and include it in our full services model," Dunne tells Light Reading.

"The trial is to see how that works with customers, how they use it. We took the view that we should be at the center of innovation in voice. Now, just because we bought Jajah that doesn't mean we think we need to own everything, but voice is very core to our proposition," he adds.

IP voice over Wi-Fi looks like a service that would help kill off O2 UK's valuable traditional voice revenues, so what's the operator's view on the cannibalization of its core revenue-generating service?

"The challenge is that if we don't offer [VoIP], our customers will go elsewhere and we could lose the primary relationship with our customers. ... We are not increasing the risk of cannibalization, we are internalizing it," says Dunne.

The O2 Connect service has been developed by what is now Telefónica Digital, the new unit formed recently to develop services, business models and relationships for the global operator. (See Telefonica Holds Key to Digital Model, Telefonica Restructures, Creates New Units and Telefónica's Looking Trendy.)

"By having Digital, which is a shared resource, it increases the chance of having this sort of innovation," says Dunne. "In telcos there's the chance that the 'old telco' mentality would override everything," he adds, but he believes that the new unit, which has been blessed with relative autonomy, will "be able to create new business models for O2 and not be constrained by a legacy mentality."

— Ray Le Maistre, International Managing Editor, Light Reading