Mobile operator Telefonica is to slash its range of handsets as part of its efficiency drive, freeing it up to develop new products and services within its digital division.

Telefonica, which runs the O2 mobile brand, has restructured the company in recent months into two geographical divisions of Europe and Latin America, and created two new operating units, with a digital division and a global resources unit.

The aim of the global resources unit is to make the company more efficient, with more central buying of equipment across the company to take advantage of its scale and prevent duplication.

Matthew Key, the former head of Telefonica Europe who is setting up the new digital unit, told reporters that the group currently sold 240 handsets, with only 12 common in every market. It intends to reduce that number to below 100.

Key's digital division will bring together all of Telefonica's digital projects and research and development under one roof in a bid to create new services and speed up the time it takes to get them to market.

It will focus on such areas as digital advertising, financial services, cloud computing and machine to machine operations.

As part of the push to create new services, Key said Telefonica would invest not insignificant sums to start up companies and hold academies to support new ideas and businesses around the world.

Asked at a dinner on Tuesday night why start up firms would want to partner with Telefonica, Key said the group could boast millions of customers around the world.

It's a gateway to 300 million customers around the planet, he said.

Vodafone, the world's largest telecom operator in terms of revenue, launched a suite of Web services in 2009 to compete with the likes of Google and Apple, offering music and video content and an application store.

The service, which aimed to tap in to the explosion of consumers accessing the Internet via their mobile phones, failed to take off however and Key said Telefonica would learn from the mistakes.

He said Vodafone and others had tried to control the service too tightly, rather than giving developers free rein to make the kind of things consumers want.

(Created by Kate Holton)

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