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Why Analytics is the Answer for the Modern Day CFO?

As Gordon Gekko from the movie Wall Street (1987), rightly said, “The most valuable commodity I know of is information.” Fortunately for telecom operators and their Chief Financial Officers, they possess no dearth of this ‘valuable commodity’, which they can leverage through telecom analytics

Find out how CFOs can leverage their data through telecom analytics, by gener to make better decisions to drive growth and mitigate risks by viewing the recording of the webinar on ‘Don’t Get Left Behind – a CFO Guide to Leveraging Advanced Analytics’, which took place on December 14th .

But let’s take a step back for a moment.

The telecom world as we know it is evolving, and with it, the role of the CFOs has also been undergoing a drastic change. His role is no longer confined to be solely focused on past performance, on the numbers, and on financial reporting, but the mandate seems almost universally to have been exceeded, with the CFO needing to also provide information about where the business is going and how quickly it is getting there. [1]

The CFOs involvement in corporate strategy has also become an integral part of the job, with CFOs now having the ability and the mandate to contribute directly to the direction of the business as well as reviewing and reporting on its performance1. This all means that today’s CFOs need to be more strategic and need to ensure that there is better alignment with strategic business imperatives and this requirement puts the CFO at the focal point for not just financial reporting but also managerial reporting, along with his core objective of maintain a strong and healthy balance sheet.

But, as we know, the dynamic nature of the telecom environment places multiple hurdles in the face of the modern day CFO, which include, but are not restricted to the following:

  • CFOs today need to ensure that they are able to increase margin and earnings performance
    • It is a well-known fact that ARPUs have been steadily declining in every region of the world, and coupled with slow revenue growth is leading to a steady erosion of margins since 2010 in most regions[2]. In the midst of these challenges, the mandate of CFOs to increase margins and earnings performances in becoming increasingly critical, and difficult.
  • Organisational attempts at growing revenues are being deflated by errors and leakage
    • Addressing Revenue leakages are a major concern for telecom operators[3], and is quickly becoming a CFO mandate considering currently most RA teams ultimately report to the CFO[4]. Considering that revenue leakages have a direct impact on revenue growth, it is now the role of the CFO to take a proactive stance in addressing any errors and leakages.
  • Assessing risks and developing measure to prevent security breaches
    • Like Revenue Leakages, security breaches and telecom fraud can cost operators heavily, and is an obstacle in the way of ensuring CFOs maintain a strong balance sheet. $38.1 Billion (USD) was lost to fraud in 2015, and though the number is decreasing YoY, telcos are still feeling the pinch of losing cash to fraud, and the task to resolve this lies with the CFO.
  • Increasing Capital Expenses during a period of decreasing revenues
    • A recent survey that was conducted by TMForum led by Subex revealed the following findings:
      • 1 in 3 operators do not measure returns on CAPEX investment
      • 77% of the respondents believed that inadequate asset utilization leads to increase in costs
      • 55% of the respondents believed that network planning is based on guesses
      • 64% believed that capex planning is driven by technology and not business objectives

Moreover Global CSP revenues declined by 5.3% for the year ended March 2016, while capex increased, pushing up capital expenses (capex/revenues) to 19.8% for the year.[5]

  • Increasing competition, even from OTT players
    • Which according to Ovum, is expected to cost Telcos a total combined $386 billion between 2012 and 2018
  • Responding to the volatility and velocity of change
    • The signs are that revenues from traditional services will plateau over the next 10 years. Indeed, income from traditional communications services is anticipated by some analysts to decline by 50% from current levels by 2025. This means that CSPs need to embrace the digital revolution, and can no longer remain as dumb pipes but need to be seen as smart pipes by offering digital services and be seen as DSPs or even LSPs (Lifestyle Service Providers)

And the challenges don’t just end there! Today CFOs need to spend more time and effort managing the future rather than dwelling in the past, and hence need to take an even closer look at data analytics to connect the dots and to predict the future. To their advantage, telecom CFOs possess unprecedented quantities of data, from multiple sources including customer data and network data, and can leverage this data through the power of telecom analytics.

If leveraged in the right way, by applying advanced analytics, telecom CFOs will be able to address the challenges they are facing, and achieve business outcomes that align with their agenda, through the generation of actionable telecom insights. CFOs will possess the power to have a 360 degree view of their business context and identify and even predict issues, opportunities and threats proactively, and will help them address them before internal audits. For these reasons, it has now become the mandate of the CFO to drive analytics for both strategic and operational decision-making.

By generating Telecom Insights, an Advanced Analytics Solution can help CFOs to meet the increasing expectations placed on their changing roles by enabling them to:

  • Proactively predict and direct resources to counter risks and leverage opportunities
  • Reduce uncertainty by predicting disruptive changes and respond and adapt to create growth opportunities
  • Predict revenue leakages and fraud to proactively address risks
  • Predict redundancies and reallocate budgets to reduce and control costs
  • Increase impact of pricing and promotion decisions through optimization

Advanced Telecom Analytics has the scope of helping CFOs of telecom operators meet business objectives drastically, and we have even witnessed, or rather helped a Tier 1 CSP, based in North America save costs by purely helping them resolve disputes. Through the generation of telecom insights, the partnership helped the CSP improve their hit ratio of predicting and addressing disputes to 9x, which in turn helped them save up to a few million dollars. Thus is the power of Advanced Telecom Analytics.

To find out more about how CFOs can leverage telecom analytics for revenue maximization and risk mitigation, view the recording of the webinar on ‘Don’t Get Left Behind – a CFO Guide to Leveraging Advanced Analytics’, on December 14th.

[1] http://www.ey.com/gl/en/issues/managing-finance/the-dna-of-the-cfo—perspectives-on-the-evolving-role—the-cfo-s-contribution

[2] https://www.strategyanalytics.com/strategy-analytics/news/strategy-analytics-press-releases/strategy-analytics-press-release/2015/01/23/global-trends-for-mobile-operators-show-stagnant-revenues-and-declining-margins#.WD-iJeZ9600

[3] https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/global-revenue-assurance-survey/Documents/global-revenue-assurance-survey.pdf

[4] https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/global-revenue-assurance-survey/Documents/global-revenue-assurance-survey.pdf

[5] https://www.ovum.com/research/communications-service-provider-csp-revenue-capex-tracker-1q16/

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