O2 owner Telefonica this week said its new digital division already has three deals in the pipeline.
The new arm of the company, formed in September, plans to invest heavily in up-and-coming tech firms, which can be integrated into the Telefonica brand or licensed to other companies.
Matthew Key, chief executive of the new division, said O2 Digital chose London as its base because it is “one of the most innovative parts of our business”.
He said the business is considering establishing a base in Tech City but said it also has strong ties to creative industries based in the West End.
Key said Telefonica can give start-ups access to its 300m global customers, making it an attractive alternative to more traditional venture capital or angel investor routes to capital.
He added O2’s investment war-chest was “significant” but declined to give an exact figure.
José María Álvarez-Pallete López, who will take over as European boss from Key, said the “whole future of the company is going to be based in the digital space”.
He also said Telefonica must be “part of the solution, not part of the problem”, in terms of the European crisis. He said: “Things are bad but there is light at the end of the tunnel. We need to use this to our advantage to change and invest.”
Telefonica Spain, currently one of the company’s three main hubs, will be subsumed into its European division, creating a €34bn (£30bn) revenue business with 105m customers.
The new digital arm will take equal billing with the European and Latin American businesses.