Capex Optimisation

It stands to reason that the Digital lifestyle of consumers will dramatically impact how operators generate revenues over the next 10-15 years. Transformations are taking place that will move activities, entertainment, commerce, healthcare, transportation, and most other aspects of our lives into Digital modalities. This has invited thousands of micro-providers of applications and networks into the mix, quickly marginalizing the value of the operator to merely an “enabling pipe.” This puts the operator into a competitive situation, ultimately impacting margins. But that’s only on the revenue side of the equation… the story could become far more complex.

For an operator, the days of 25%-40% EBIDTA are waning, if not almost gone (in many regions). Pressures on pricing remain downward, with new product offers being the primary method to sustain acceptable revenues and margins. This has opened the door for some impressive creativity by many operators, especially in developing markets. In many cases no market appears off limits, as seen by the offerings by progressive organizations like MTN in Africa: Who would have anticipated an operator would offer personal transportation services rivaling Uber?

These seemingly odd moves are, in fact, brilliant moves by operators to seek new sources of revenues as their businesses are being redefined by the digital services we are quickly becoming reliant on. The impacts on revenue models due to this change in the business are stunning: Traditional billed services like voice, and even data, are fading in importance. Revenue models are instead focusing more on casual services, pay-per-use services, marketplace services, etc. Put more simply, the “pipe” is no longer where the earning potential lies for the operator.

So now a previously non-agile, large operator business is finding itself competing with, and in many cases partnering with, literally thousands of aggressive, hungry micro-entities that provide products and services accessed by the networks. There is less reliance on monthly guaranteed revenue; the battle for revenue very often resides in millions of micro-transactions.

All of the discussion cannot focus entirely on revenues, however. Margins are also sustained by costs. Agility, therefore, must exist on the cost side of the operator business. In the old world of monthly recurring and predictable revenues, costs could be managed and allocated more confidently. Opex and Capex planning and forecasting practices were based on budgeting with a high degree of certainty. But as revenues models are changing, so must cost models. Where possible, operators will need to employ similar creativity to curbing costs, as they are with earning revenues.

How can operators, therefore, modify cost models in the business to be as aggressive and variable as the revenue models they rely upon? This is where the opportunities for SDN/NFV networks can shave significant costs, while changing operator cost models in ways that were not previously achievable.

Software-Defined Networks (SDN) and Network Function Virtualization (NFV) will allow operators to provide Network-on-Demand and Service-on-Demand models to consumers, while effectively minimizing, if not eliminating the need for human intervention. The costs associated with truck rolls, call centers, and expensive specialized network equipment will be dramatically reduced, resulting in decreased Opex and Capex burdens on the business. The savings need to expand further, however.

In current cost models, operators must deploy and maintain network services around the clock, which consumes significant and ongoing expenses. However, if a network is based on SDN/NFV architectures, the deployed services are no longer in a fixed position in the network, simply because they are now software-defined and/or virtualized. This means an intelligent network can move assets where needed, and when needed. These assets are capitalized as licensed instances; so now an operator can have a pool of 1,000 licenses for a virtual service, and deploy them only as necessary.

This type of dynamic deployment model should allow operators to negotiate dynamic cost models as well; imagine only paying for a license when you have it deployed (and it is generating revenue). While this idea may seem far-fetched, consider that now the network functions we are discussing are no longer controlled by a few network equipment and function providers; micro-entities (application developers) can now produce those functions, often at far less expensive price points.

The business transformations taking place in operators globally are forcing entirely new ways of addressing margin pressures, as the revenue and cost variables operators have historically used are no longer the same. Looking beyond margins in consumer-facing products and services, new network cost models must be explored, especially since those models were based on what is now an outdated means to earn revenues.

“A lot of people have been talking about how capex is going to come down with SDN and I’ve said, ‘No, it’s going to stay the same for Verizon’  – Fran Shammo, CFO, Verizon. May 2016

This comment right from the head honcho of one of the largest Telcos in US cannot be taken lightly. Despite lot of talk in the industry about SDN / NFV CAPEX reduction benefits, we’re seeing skeptical questions around smooth transition to virtualization. But I will keep SDN /NFV discussion for some other day. Let us focus on the topic – CAPEX spends. Verizon’s CFO has confirmed its CAPEX spend going to stay, despite network virtualization!

The CAPEX focus could be different for different Telcos. For some Telcos like Verizon, their CAPEX spend mainly focused on future technologies, leading the market, greater customer experience etc. For some other Telcos, their budget constraints force them to think hard and do delicate trade-off between strategical “revenue-growth” projects and tactical maintenance projects to keep up with network growth, retain customers, improve quality of experience etc. With this hard balancing at hand, what if Telcos are equipped with smart tools & methodologies that could help in optimizing their on-going CAPEX? But, is such thing exist? I will get there in a moment. Please bear with me.

First, let us go through few industry trends.  In our recent study from Gartner, we got few interesting insights.

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Here is short summary on the insights:

  • On an average Telco spends 15% – 20% of annual revenue on yearly Capital Expenditure
  • Increase in Capex spends w.r.t revenue (CAPEX Intensity = Capex / Revenue) is not translating into equivalent increase in revenue growth
  • Correlation between CAPEX Intensity and Revenue growth is a weak factor for Telcos mentioned in the regions. This means revenue growth is not linearly correlated with CAPEX spends
  • 5-year flat growth in revenues across geographies is not encouraging. Max 20% 5-year top-line growth in North America region and deep negative for Europe region (-11%)
  • Cost of capital over last decade is higher than RoI on an average across the industry
  • Notable positive point is the margins are maintained in 25 – 35% range across geographies. And it is imperative to maintain this margins to generate free cash to fund next CAPEX cycle but if not completely.

The above stats where CAPEX spends are not reaping substantial revenue growth indicates two major viewpoints:

  1. Strategic capital investments have a slightly long gestation period but not comparable to capital cycles of traditional industries like manufacturing industry.
  2. Bulk of CAPEX go into maintenance projects. That is, to keep-up with current network demand juggernaut, customer retention, quality of service etc.

For instance, a good chunk of leading Tier 1 North American operator’s CAPEX goes into wireless network for densification and getting future ready for 5G deployments. This could be a case for many big Telcos – investing on future technologies. On the contrary, we have also seen majority of Telcos’ CAPEX going in for second type of investment – meeting current network data growth. This is nothing wrong as such and very much required to keep customers happy.

However, if one looks at this fact in light of recent market research findings from one of the big four audit firms, it gives a different perspective. The research reveals that majority of the Telcos not equipped with enough tools or industry best practices to assess the CAPEX spends on projects, evaluate ROI for each such investment and perform sustainable capital allocation. This is a surprising revelation. It simply means that many Telcos are servicing on-going CAPEX without rigorous assessment on actual RoI vs planned RoI, are not taking forward lessons learned from previous CAPEX cycle. Even the Telcos who do have rigorous processes, right incentive structure, accountability of results etc. actually misses a critical point.

What Telcos underestimate?

The critical point is – generally the assets, especially the network assets are viewed from monetary value perspective only in this whole CAPEX scheme of things. The value that can be derived from un-lit or under-used network asset capacities for the CAPEX planned is not given deserved thought or action. This is because of the fundamental reason that financial and network data of assets are lying in silos. This data is never used together to gather useful insights to put the network assets to sweat to furthest possible aligning with ever growing network demand and broader strategic CAPEX – RoI goals. Telcos can do more with their data. It would require collaborative efforts with right partner to unleash the power residing underneath the siloed systems.

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Subex Blog

How does one gauge the financial performance of a telco?   Earnings growth, commonly measured using EBITDA, is favored by many analysts.  But how much of the story does this metric tell?   For a telco, OIBDA (Operating Income Before Depreciation and Amortization) may be a bit more insightful given that it generally excludes income and financial events outside of the core business.   Of course, there are many secondary metrics that often get attention during earnings calls and we know them well: ARPU, postpaid vs. prepaid mix, subscriber growth & churn, etc.   I’m going to make my case in this space for another metric that should be top-of-mind for executives, corporate boards and analysts: Operating Cash Flow or OCF.

Let’s start with a key component of OCF which is Capex Intensity.  This is simply the ratio of Capex to Revenue.   Ideally, it should be normalized to exclude one-time significant events like investments in spectrum.   Subex conducted a study of financial results for 44 large tier operators between 2011-2015*.   One of the interesting, if unsurprising, findings is that Capex Intensity has been rising steadily.  Consider the following chart.  In 2011, the average Capex Intensity was 15.9% for the operators in our study.   In 2015 it was 18.9%.   We also have data going back to 2008 which shows an industry average of 13.3%!

OCF_Chart_1

The chart shows Capex Intensity for Americas and Europe are slowly tracking upward.   In 2015, there was a huge spike for the big groups while there was a dip for APAC.  This is largely explained by inclusion of the big Chinese operators (China Mobile, China Telecom and China Unicom) in the “Groups” category provided by Gartner due to their scale.  Capex Intensity for these three was over 38% in 2015 as China scrambles to build out LTE infrastructure for all those folks using WeChat and shopping on Alibaba!

Now consider the five-year trend for OIBDA.

OCF_Chart_2

Between 2011 and 2015, for the operators in the study, OIBDA margin declined an average of 2.2%

This brings me back to Operating Cash Flow (OCF).   Anyone who runs a business will tell you that free cash from operations is their most watched number.   I ran a commercial kitchen with 5 employees for several years and, believe me, I lost many nights sleep over our cash position.  Then I got back into telecom.  What was I thinking?  But I digress…

My argument is that the influence of Capex tends to get buried in financial statements.   Certainly telcos have to invest in networks to fuel subscriber growth and deliver a rich customer experience.  But the trends in Capex Intensity (up) and OIBDA margins (down) are unmistakable and they compound each other.  Take a look at the next chart.

OCF_Chart_3

OCF = (OIBDA – Capex)/Revenue, or equivalently, OIBDA Margin – Capex Intensity.    So it is a fairly complete measure of the operational health of an operator because it considers Revenue, Opex and Capex.  Anything left over can be used for debt service, taxes and dividends.   Between 2011 and 2015, OCF among operators globally fell 5.3%.   This is a significant observation.

What can reverse the trend?  In the long term, business models that better compete with OTT players is certainly a hot topic of discussion.  Perhaps SDN and NFV will tilt network economics back in the telcos’ favor.   In the near term, it is clear that better Capex governance and controls can at least slow the trend.  Keep in mind that 100% of Capex savings flows to the bottom line, while an incremental dollar of revenue only contributes the margin amount.

I see these industry numbers as a call to action—managing and reducing Capex should be an imperative at the corporate board level for every telco.   Capex governance includes:

  • Giving commercials and finance teams some of the same visibility to asset utilization as the network teams.
  • Aggressively exploiting cases where assets can be reused before purchasing new
  • Proactively selling off excess assets while they still have value to other telcos
  • Keeping financial and technical records of assets fully aligned
  • Placing better controls on high-risk assets at the edges of the network such as CPE, set top boxes, access points, small cells and handsets

I’ll close with this observation— while SDN and NFV bring the promise of reducing Capex via virtualization and commoditization, the economics are not yet proven and the transition will take years.  Early adopters of NFV have found, for example, that it may take multiple Virtual Network Functions (VNFs) to replace the same function performed by one instance of legacy software on dedicated hardware.  This erodes Capex savings from virtualization.  The lesson is that exploiting approaches to reduce Capex in the existing network should not get lost when chasing the promise of virtualization.

If you would like more background on the methodology used for our analysis, and the operators we included, please write to me.

*Raw financial data supplied by Gartner.  Analysis by Subex.

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Telecom companies across the board often crisscross their blades with OTT players. While it’s true that Telcos are trying to find sustainable new avenues – few are succeeding, their current-state CAPEX keeps growing at an ever faster clip. This is mainly due to exponential data demand from customers resulting in increasing investments into network to keep up quality customer services. With ubiquitous mobile connectivity and video traffic demand spiraling-out, it puts enormous amount of stress on the networks. Telcos need to continue investing in this consumer trend [current-state CAPEX] and at the same time figure out alternative growth areas [growth CAPEX].

To invest in new avenues with better ROIs, Telcos need to keep close tabs on their CAPEX that goes into network for present growing customer demand. And follow the traditional mantra – keep the current cash flow as cushion and invest for future. But for many Telcos, the worrying part is large chunk of the cash flow generated is ploughed back into network to meet current demands. This leaves little room to focus on new growth areas. Telcos are forced to raise money via debt or other means, resulting in further stress on balance sheet and reduced returns to investors.

Let’s take a look at a snapshot of financial summary of a public listed global telecom major:

[Figures are normalized]

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On a closer inspection of this summary one could observe,

  • The CAPEX has increased significantly (50%), but contributed only marginal increase in operating income (2%) and revenues (10%) over a year.
  • At the end of three year period, the CAPEX investment grew nearly to 20% of annual revenue but the corresponding incremental revenues seen marginal uptick only.
  • Return on Assets came down to single digit despite spending cumulative CAPEX of nearly half of average yearly revenue for this period.

Without undue speculation and with publicly available data, one could do an educated guess: during this period, most of the CAPEX went into supporting & enhancing existing network infrastructure to keep-up quality services.

This picture is not much different from any other typical Telco in the developed or emerging markets. While Telcos try to figure out the next wave of growth, it is equally important to keep a check on the current-state CAPEX.

Telcos have no dearth of information in their siloed systems. It is just that few of these system’s data need to be unleashed to discover insights that can help in reducing CAPEX. For instance, reusing stranded assets in the network, warehouse and spare stores during purchase decisions would reduce CAPEX drastically. This would require deeper analytical insights generation, with collaboration among operation teams within the Telco towards achieving a common goal.

Telecom operators with better equipped analytical tools to gather operational insights and actionable work flows can reduce their on-going CAPEX, draw more mileage from the pan-network assets and derive better return on assets in the network.

Now that’s something that we’ve all heard at our workplace at some point..and believe it or not, its not entirely incorrect.

Traditionally most organizations have been created with a vertical structure having clear demarcation of responsibilities and identified handoff points for communication and information interchange between verticals. This was thought to be the most optimum way of assigning limited resources within the organization while allowing for specialization within verticals. Think of this organization as an architectural structure with three key layers:

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  • Apex of the structure represented by executive management and strategy layer of the organization
  • Pillars represented by different verticals within the organization
  • Strong base represented by organizational infrastructure which acts as a common foundation

While efforts are made by every organization to eliminate ‘silos’ in functioning, the inherent nature of this structure results in unidentified hand-offs, ineffective information sharing during hand-offs and compartmentalized view of processes leading to challenges in measuring, improving and most importantly identifying ownership of cross-functional processes. In many instances, different verticals end up shifting accountability of such cross-functional processes at the expense of progression. The pace at which technology, markets and customer demands are changing in present times demand a level of agility within the organizations to respond and keep pace with the market and competition. This places an enormous stress on the organizational structure, particularly on the handoffs between verticals.

Managing millions of dollars’ worth of Network Capex within a Telco is a cross-functional process which experiences similar issues of ownership, handoffs between verticals and lack of a common, centralized view leading to ineffectual Capex tracking much less calculating effectiveness of these Capex investments or return on investments. Typically, Finance is the identified owner of Capex investments in a Telco but most Finance teams struggle with deployment of Capex in the network and more importantly tracking and calculating the return on network Capex investments as they are heavily reliant on Operations team for this information.

Solving this Network Capex conundrum calls for a two-pronged approach, creating a cross-functional Network Capex Assurance team and enabling a supporting technological component to create a Network Capex Control framework. Lets have a closer look,

Network Capex Assurance Team

A cross-functional team which acts as the owner of Network Capex investments within the Telco – typically lead by the CFO or CTO. This team delivers critical insights and drives actions to enhance capital management practices in all phases of the business and comprises of representation from Finance, Planning, Procurement & SCM, Deployment, Operations and IT. The key responsibilities of this team would comprise of,

  • Custodians of Capex management processes
  • Capex planning and validation
  • Ensure data integrity across supporting systems
  • Capex tracking and analysis
  • Standardization & Reporting

Network Capex Control Framework

network capex frameworkAn enabling technological component which supports the Capex Assurance team in delivering their responsibilities by providing a centralized end-to-end view enabled by Network intelligence. Key insights from the framework would cover,

  • Centralized view
  • Standardized processes
  • Utilization and effectiveness
  • Capex & Opex optimization
  • Insights & Analytics

Enabling strong capital management practices is much more than operational or process changes in the organization; it is a fundamental change in the outlook of an organization. Embracing this change will enable agility, data integrity and measures for optimization, better equipping Telcos to respond to the rate of change in the industry..and that should be everyone’s responsibility!

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I was recently asked by a Tier 1 client in North America if Subex can use our network discovery technology to retrieve information from D4 channel banks.  I honestly had not crossed paths with these relics of the voice network since my days doing central office engineering in the late 80’s.  So you may be wondering, in a day-and-age when the buzz is about SDN/NFV, IoT and everything in the “Cloud”, why is someone worried about the humble channel bank?

As it turns out, there’s plenty to worry about.  End-of-life technology can be a significant Opex drain.  Operators incur costs for energy (power, HVAC), maintenance and real estate to keep such equipment in place.  Compounding the problem is that much of this old equipment typically sits racked, stacked and powered… and idle (no traffic).   Channel banks are just one example.  Arguably, the entire fixed-line TDM network is retirement-age (I’m talking about SONET/SDH DACs and ADMs, voice switches, local loop equipment, etc.) and needs to yield to IP/MPLS and VoIP.

In a previous blog post, I wrote about what operators need to consider when planning a transformation from legacy technologies to future state.   For this post, I will stay grounded in the present and focus on this question: What strategies can operators employ to reduce their Opex and Capex burdens when operating a legacy network?   For starters:

  • Use network discovery techniques to determine the operational status of your actively deployed network assets.
  • For all unutilized assets, apply a deliberate strategy to disposition everything.  Too often, because operators don’t have adequate visibility to operational status and utilization of assets in the legacy network, they default to what I call a “rust-in-place” strategy.  Since they lack the visibility, they ignore the problem.  Equipment sits idle or underutilized and costs add up.  My suggestion is to proceed with purpose—if an asset is carrying adequate revenue-producing traffic, fine.  If not, do something about it!

Asset Program Diagram

For assets with reuse potential, then the options include:

  • Harvest and reuse elsewhere in the network.  Benefit: Avoid Capex for new purchases.
  • Perform grooms to more densely pack some assets and free up others for reuse or end-of-life monetization.
  • Allocate as spare.  Benefits: Reduced maintenance costs when spares are optimized in terms of count and location.   Customer experience is improved and exposure to SLA penalties is reduced when spares are well managed.

If there is no reuse potential, then consider:

  • Reselling on the secondary market if there is still industry demand for the asset.
  • If not, then recover and sell for salvage value.
  • In both cases, remember that the NPV of averted monthly energy and real estate costs may actually exceed any direct cash received when the asset is sold or salvaged.
  • Don’t overlook other possible financial benefits from disposing unneeded assets such as tax write-offs and reduced insurance premiums.

Most importantly, seek an asset management and logistics partner who can help you squeeze the most value from legacy assets.  Elements of a legacy network cost reduction program include:

  • Automated audits via network discovery
  • Asset evaluation and disposition recommendations
  • Capacity utilization trending and related analytics
  • Asset tracking
  • Turnkey asset recovery services
  • Resale valuation and brokerage services
  • Eco-friendly recycling
  • Analytics for sparing level optimization
  • Spares management
  • Warehousing and related logistics services
  • Warranty and annual maintenance contract management
  • Test, repair and engineering services

Subex provides industry-leading asset management solutions and services.  With our forward and reverse logistics partners around the globe, we can help you to establish a turnkey and highly effective legacy network cost reduction program.

OK finance teams, time to come out of the shadows.  At most operators with whom I have worked, the focus of enterprise data quality efforts has been on optimizing network operations.  Misalignment between the network and data in systems that support planning, provisioning, activation and service assurance adds friction and cost to essential telco processes.  No new insight here.

Lately I’ve been spending more time with the finance guys.   Despite stereotypes to the contrary, they’re not just number crunchers.  They care about what’s in the network- where it is, how old it is, the condition it’s in, where it’s been, where it’s going and what happens at end of life.  Complicating their lives, the financial database of record for network assets, the Fixed Asset Register (FAR), typically suffers from the same data issues confounding the Ops teams—if not worse.

Sounds bad, but Finance doesn’t have to worry about delivering or supporting new services.  So what’s the harm?   Based on the earful I’ve received from finance organizations, including a Tier 1 CFO—plenty.  This diagram provides a sampling of corporate functions dependent upon accurate asset records in the FAR:

Mission Critical Role of the FAR

Role of the FAR

Among the potential costs of inaccurate fixed asset records are:

  • Improper calculation of depreciation
  • Failure to identify impaired assets and candidates for accelerated write-downs
  • Overpayment of property taxes
  • Overpayment of insurance premiums
  • Restatement of past financial results
  • Risk of regulatory penalties
  • Exposure to fraud, theft and asset mismanagement cases

Such issues get corporate board-level attention.  I am aware of several recent cases of poor FAR audit results prompting an operator to launch a FAR cleanup effort or even a full asset management program.

To their credit, financial reporting analysts I have spoken with are not blind to their data woes—just typically dependent upon compromises and work-arounds.  They often manage as best they can by mining numerous B/OSS’s to cobble together a view of assets across all network layers and asset classes.  Gaps and inaccuracies in this view abound.

Among the most common methods finance organizations employ to address the situation are manual audits performed on sample sites once or twice a year.   This mostly provides insights on how far off the FAR is from reality.  Generally, such spot audits are too limited and expensive to support systemic and continuous correction of the errant data.

So how do we achieve a reliable FAR (before the Board takes it up as a crusade)?

It starts with determining the impact of inaccurate asset records on financial reporting and planning, corporate governance, taxation and regulatory compliance.  Is the exposure minimal and bounded, or are the risks unacceptable?  Assuming the latter, a FAR get-well plan should include:

  • Data acquisition methods for both active and passive network assets that use the network itself as a source versus other systems
  • Comparison of this data to the FAR and reconciliation of errors
  • A permanent mechanism to keep the FAR aligned with the changing network so the data stays clean
  • Commensurate process enhancements and guardrails to reinforce automated approaches—which can never guarantee 100% accuracy on their own

When tightly aligned with the network, the FAR becomes more than a reporting tool, it can become a strategic enabler for Capex optimization.

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The battle is heating up and speeding up in virtually every market. Customers want the newest, latest, greatest handsets, products, and services.  But how long has this battle been heating up, really?  The answer is simple:  Since the 1980’s.  All that has continued to change are the tools used by the operators in the battle.  Let’s examine the latest tools being used in the Americas and understand how that impacts Capex.  The results may be surprising:

In what is arguably the start of the latest rounds of “artillery”, T-Mobile launched free roaming to over 100 countries in 2013, and started attracting customers by the millions away from the likes of AT&T and Verizon.  After the immediate dust settled and the program was seen to actually be viable, AT&T responded with paying the early termination fees for converting subscribers from T-Mobile.  In the process, flat rate plans with expanded data benefited all of us, as T-Mobile and AT&T both offered non-contract based data allotment increases, for no cost (and in many cases, lower costs) to existing subscribers, to shore up their retention numbers.

Verizon has taken a more conservative approach, saying they have the largest 4G network, which has caused AT&T to counter with having the fastest 4G network.  Not to be left behind, T-Mobile responded with offering to roll over unused data, and to unleash attractive unlimited plans via their recently acquired MetroPCS brand.

All the while, Sprint, the last major national carrier in the mix, has been losing market share while “sprinting” to greatly expand their 4G network.  In the recent weeks they have jumped into the market with a very viable message, aimed directly at AT&T and Verizon, to cut subscriber bills in half…literally.  They even took out an ad in the most expensive slot in the world:  The American Super Bowl.  This ad was designed to “apologize” to AT&T and Verizon.  The results of the campaign, however, are not making Sprint apologetic at all:

And now the latest, and perhaps most interesting move, has been the international expansion of some operators into Latin American markets.  The model is simple:  Buy a Latin operator network.  Re-brand it to your internationally known name.  Offer local services that extend all the way into North America.  No roaming or interconnect, and all local calling.  This is a major threat to long-time incumbents in the Latin market, and it’s already happening. Three years ago I was asked what I thought the impact of 4G/LTE would be to the markets.  I made a quite possibly crazy prediction that 4G was going to upset the way we understand roaming and interconnect, simply due to the fact that data, VoIP, and the new products that were going to ride on femtocells and wifi / wimax were going to totally change the playing field.  Could it be that something similar is gathering momentum today?

What is the common thread in all of these battles in the Americas market(s)?  Quite simply, the operator revenues are not growing, or are not growing at the pace to keep up with Capex spend.  Networks are being extended and evolved not to add revenue, but instead to sustain revenue.  Here’s an example:  In the last 24 months I have moved my entire family to 4G.  My bill decreased.  More data was added to my plan.  My bill again decreased.  I then expanded my home DSL to a 30x increase in speed.  My bill stayed flat.  All of this involved more network capacity and expansion in products and services.  But I was not further monetized…I was just retained.

Capex optimization, if pursued for growth, could be considered a great goal and something to strive toward.  However, if Capex optimization is pursued to simply maintain your revenues (and market share), this should no longer be considered a goal, but instead a critical strategy for longer term survival.

So ultimately, how do operators monetize networks?  Perhaps the question needs to be focused on monetizing customers – by turning attention toward strategies that get more share of wallet.  Operators should invest Capex into supporting behavioural shifts in their customers.   Mobile wallet, xBanking, xCommerce, etc, need to be provided as revenue-generating services by the operators, for those customers.  It’s no longer about getting money for network services…it’s now about getting money from supporting a behaviour facilitated by those network services.

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