Case study on Network Operations Transformation

Image source: Deutsche Telekom Investaura Management Consultants has released a white paper re-visiting the financial benefits of managed services and infrastructure sharing for telcos.  Building on an initial discussion and review of the relevant approaches and options available, a top-down financial simulation model has been developed to analyse and quantify the benefits of alternative options available to communications service providers (CSPs).

Implied Logic has supported the model building initiative in STEM and is now pleased to host a simplified online view of the model.  Scroll down now to see a few representative inputs and charts to get a taste of what the model can do.

1. Key questions addressed by the model

Mobile CSPs are currently facing considerable challenges.  While voice markets are saturated in most countries, 3G/4G network rollouts require large investments which are not always commensurately compensated by increases in revenues.  Data traffic is exploding but revenue per MByte is often decreasing faster than cost per MByte.  The overall impact is that both EBIDTA and EBIT margins are decreasing.  In short, the economics of mobile telcos are getting less and less favourable, and this has been reflected on European stock markets with CSP share prices that have been taking a beating for most of the last 10 years.

There is no easy solution to these problems.  When the potential to increase revenues is limited in the short term, the easiest approach is to reduce costs in a bold manner, as incremental fine-tuning won’t be sufficient.  The STEM model that Investaura and Implied Logic have developed looks into four transformation levers that can improve the economics of the mobile carrier and potentially create considerable value:

  • Network Operations Outsourcing
  • Asset Sharing (Passive, Active)
  • Lowering the cost of capital; e.g., through vendor financing
  • Sale and Leaseback of towers to a TowerCo partner.

The model can be used to simulate the impact of these four levers, individually or in combination, and to estimate the financial benefits that they create for the mobile CSP.  Key results are the impact on Profit & Loss (EBITDA and EBIT margin improvements), the Cashflow Statement (savings in Network CAPEX and Network Operations OPEX), and overall value creation for debt- and shareholders (NPV, Return On Invested Capital).

Figure 1: Live snapshot from the model

Investaura and Implied Logic can work with you to customise this methodology to your individual market and current network position in order to fast track a credible financial assessment of your strategic options.  Please register (or log-in) to access the full model and download the white paper to review offline and share with interested colleagues.

Online model

A more comprehensive web interface exposes a broad selection of inputs and outputs across multiple tabs. A detailed description of the methodology is available to review offline and share with interested colleagues.

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About the author

Investaura Management Consultants is an independent telecom consulting firm founded by senior telecom professionals. It works with CxOs and senior managers to help them solve their toughest challenges. Beyond strategy, Investaura is execution and delivery oriented. Its consultants are pragmatic, bring no less than 10 years of professional experience in the industry, and have worked in more than 40 countries worldwide.

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