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.