Telcos must strike deals and partnerships with web 2.0 companies, and run them much in the same way as investment companies would, says Stan Miller, head of KPN International. "We must partner with web 2.0 companies because they have skills that we don't have," Miller told StrategyEye, at the Telecom Finance conference in London. "Typically we should take a small stake in the company" and "maybe one of these will become a Google."

However, Miller warns that telcos must "nurture" these internet firms "like private equities would," rather than incorporate them, which could be a recipe of disaster. "You need to create companies separate from yours [and run them like an investment]." KPN itself is planning to unveil a deal with Gigafone, a Russian SMS and mobile services provider. Miller says further investments are likely to be announced over the years to come, but would not give more details.

Partnering with web 2.0 firms will allow telcos to gradually turn around their business models. According to Miller, the trick is to find out "what we can give for free to our customers, and make money out of it. If I were Google, would I charge my customers five cents everytime they use my search function?" Taking the example of online dating, Miller says a telco could partner with an online dating site to offer its customers unlimited access for a bundled price, and monetise it by getting a cut of revenue per clickthrough. Miller also says telcos should take advantage of the huge pool of information they hold about their customers.

If you look at Google today, and at the information that they have, it's a very thin slice." In contrast, telcos "know everything about you: I know where you are, I can read every SMS of yours, I can listen to you talk on the telephone…we know your address, we know your name… There's a whole lot of information, right there. It's gold."

Telecom firms can even activate the cameras of their customers' mobile phones, he claims. Privacy issues currently restrict how telcos use this data, but holding the information will undoubtedly be of value as telcos turn to the web to change their business models, not least with targeted advertising.