Consultant Value Added

In June 2003, the US Securities and Exchange Commission (SEC) published its final rule to implement Section 404 of the the Sarbanes-Oxley Act 2002. Section 404 requires management’s annual assertion that internal controls over financial reporting are effective.

S404 specifies a series of minimum requirements to be contained in management’s report, such as:

• A statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting for the registrant;
• A statement identifying the framework used by management to evaluate the effectiveness of the registrant’s internal control over financial reporting;
• Management’s assessment of the effectiveness of the registrant’s internal control over financial reporting as of the end of the registrant’s most recent fiscal year, including a statement as to whether or not internal control over financial reporting is effective; and
• A statement that the registered public accounting firm that audited the financial statements included in the annual report has issued an attestation report on management’s assessment of the registrant’s internal control over financial reporting.

I recently returned from an engagement where I was helping a client improve his internal control environment in order to achieve Sarbanes-Oxley s404 compliance. I don’t advocate that operators subscribe to SOX-levels of control, unless required to do so. However, I do strongly believe in the benefits of a strong internal control environment.

Read the rest of this entry »

Mobile service providers have traditionally focused bulk of their churn management and retention efforts on the post-paid customer segment. Prepaid has at best been an afterthought from a customer perspective. However, mobile operators now need to re-assess their prepaid strategies as the prepaid segment is the fastest growing segment worldwide, and churn in this segment, especially of high-value customers will hurt profitability.

As published before in this blog and based in our experience, an effective prepaid management program can increase prepaid revenue by 3 to 5 percent and/or reduce prepaid churn by 5 to 8 percent.

Fran has just come back from a central European country to discuss this topic. He met the CCO of a triple play operator and explained our prepaid management framework and how do we think we can support them in defining a successful prepaid strategy. A 2 hours meeting can be summarized in the following slide:

Read the rest of this entry »

Being so near to Spain, it’s strange to see how different the Moroccan telecom market is compared to the Spanish. Having met some key representatives there in the last month, we have updated our telecom market assessment up to end of 2008. As a result, we got the impression of what most of the people agrees: yet interesting market (that could be named emerging for any longer) but at the same difficult one. It gives me the impression that the market seems to be enjoying 3G Internet boom whilst experiencing a huge dispute for the client, something that sounds familiar to us in North Africa. Please find next some relevant insights of it as well as our market review.

Best regards from Africa, CVA.
—
The Moroccan telecommunications market continues to show strong signs of growth, with the numbers of 3G and home Internet users on the rise. We had an interesting meeting with the regulator and, according to them, the new 3G sector is taking a surprising share of Morocco’s telecom market

Growth in information and communications technology (ICT) in Morocco has been dominated by a boom in 3G Internet and the sustained growth of mobile telephone subscriptions, with a current market of more than 21.5 million customers. The number of fixed-line telephone customers has also grown, recently surpassing 2.7 million.

According to recent market indicators from the ANRT, Morocco has consolidated its growth trend in the ICT market. The numbers also show growth in the market for mobile and fixed telephony and the Internet to be sustainable. In real terms, Morocco now has more than 21.5 million customers in the mobile sector, equalling a 70% penetration rate. In terms of market share, Maroc Telecom provides roughly two-thirds of mobile coverage with 66.37% of the market, compared to 33.37% for competitor Médi Telecom.

The breakdown of mobile customers by subscription type, however, shows a market dominated by pre-paid users, with just 4% on contract. The wireless market looks set to continue its upward trend with the recent start-up of a mobile offer from a third national operator, Wana.

Read the rest of this entry »

One of our consultants, Teja Rangi, has recently updated our “Telecom efficiency improvement framework” for telecom operators. I wanted to share an extract of it with you as I think this type of tools and methodologies are critical to survive through these tough times, where process inefficiencies contribute significantly to value erosion and high costs.

Using specially designed tools based on the legendary Six Sigma methodology, mmC GROUP has developed a proven program that prepares telecom operators to measure, analyze and improve work processes across the organization, leveraging the relevant ‘human factors’ to maximize productivity and efficiency.

Having deployed these methodologies and tools in different operators, we have identified and achieved powerful operational improvements that produce sustainable business benefits. Our efficiency improvement unit of consultants is specifically focused in helping traditional telecommunications providers and wireless phone firms to become more efficient in their operating procedures.

By learning and implementing improvements our clients have been able to dramatically improve the way they do business thus attracting and keeping customers in this hyper-competitive industry and in these down-turn times, where efficiency improvements may yield up to 20% cost savings of annual turnover. Common uses? Infinite. Let me show some in which we have been working on:

1. Improvement in sales channels & distribution network efficiency
2. Improvement in product and value proposition performance
3. Maximization of customer experience in customer care departments
4. Call center BPO – voice (in bound / out bound)
5. Improvement of network quality and maximization of network capacity
6. Streamline cost of network deployment and upgrade – EPC (Engineering, Procurement & Construction)
7. Improvement in Data Quality communication between OpCos and Corporation
8. Etc, etc, etc

Interested? Take a look at the following teaser. Nice reading. Best, CVA & TRA

Starting the new year, I wanted to look back to my clients’ performance during 2008. As posted before, the financial markets took the telecom markets on a wild ride in the last quarter of 2008 and that clearly affected some of the operators’ performance for which we actually work.

It is hard to avoid the conclusion that size matters in telecom. It is an expensive business (specially in emerging regions such as Africa, Middle east or Asia Pacific); contenders need to be large enough and produce sufficient cash flow to absorb the costs of expanding networks and services that become obsolete seemingly overnight. Transmission systems need to be replaced as frequently as every two years. Big companies that own extensive networks are less reliant on interconnecting with other companies to get calls and data to their final destinations. By contrast, smaller players must pay for interconnection more often in order to finish the job. For little operators hoping to grow big some day, the financial challenges of keeping up with rapid technological change and depreciation can be monumental.

Earnings can be a tricky issue when analyzing telecom companies. Many companies have little or no earnings to speak of. Analysts, as a result, are often forced to turn to measures besides price-earnings ratio to gauge valuation.

Price-to-sales ratio (price/sales) is the probably simplest of the valuation approaches: take the market capitalization of a company and divide it by sales over the past 12 months. No estimates are involved. The lower the ratio, the better. Price/sales is a reasonably effective alternative when evaluating telecom companies that have no earnings; it is also useful in evaluating mature companies.
Read the rest of this entry »

With annual growth around 100% for some years now, the mobile telephone market in Pakistan has been experiencing a period of strong and sustained development. However, Pakistan is suffering important economic turbulences which will have a direct impact on foreign operators in the country. Some of the reasons are:

• The decline in Rupee value against the US Dollar, the decrease in the interconnect charges and lower priced tariffs have resulted in an overall decrease of ARPU in US Dollar terms.
• The ongoing economic and political turmoil along with the worsening of security conditions in Pakistan have caused an increased outflow of capital from the country, causing the Rupee value to decline a further 13% against US Dollar in the third quarter.
• In light of the worsening economic conditions and the lack of prudent policies, the international rating agencies like S&P and Moody’s have recently downgraded Pakistan’s sovereign rating.

In the period of 2007-2008 the mobile sector has been characterized by:

• Falling ARPU
• Steady subscriber and revenue growth although a slight decrease in growth has been appreciated from the previous year.
• Intense competition by new international players coming to the market recently.
• Network deployment in the regions to increase addressable market as a measure against falling ARPUs.

Mobile services, despite high costs, still grow rapidly. Subscriber numbers increased from 68,000 in 1996 to 3.3 million by end-2003; since then the subscriber base has surged to reach 80 million in early 2007 and surpass 95 million in 2008. Penetration had reached the 58% mark, but judging by the commercial activity in the market there was still room for expansion. While progress has been made in the regulatory area, some rigidity in policies had been slowing growth. Some facts of the Pakistan’s telecom industry are: Read the rest of this entry »

Orascom Telecom Holding S.A.E. (“OTH”) announced last summer its participation in a consortium to create a new Canadian owned and controlled wireless operator. The new Canadian wireless operator has provisionally won AWS spectrum in Canada. A spectrum licence will only be awarded to it if final regulatory approval is granted by Industry Canada. The new Canadian wireless operator is the high bidder on spectrum across every region of Canada, with the exception of Quebec, therein providing population coverage of 26 million. The total cost of the high bids stands at approximately $442 million Cdn. The auction, which began May 27, 2008, was initiated by the federal government to increase competition in Canada’s wireless market.

OTH has joined forces with Canada’s Globalive Communications Corporation, the parent company of Yak Communications which offers dial-around, home phone, Internet and long distance services to more than one million customers across Canada. In order to comply with Canadian ownership and control regulations, OTH will be taking a non-controlling interest in the new Canadian wireless operator.

So, how should a new entrant get into the market? In the last 3 months, I received a significant amount of emails asking for some telecom launch office methodologies and how do we think any new entrant or MVNO should ensure the success of a start-up in any market.  I decided to write about this after reading heavily about the case of the new Canadian operator and the challenge that different sources make on this concrete opportunity.

In my opinion there are two different aspect that should be analyzed: 1) Is there a real opportunity? 2) How to ensure a successful launch in the shortest timeframe?

Read the rest of this entry »

Following up the previous post related to market research and segmentation, please find next the fourh and last chapter.

CHAPTER 4.    Insight into how you win and retain different customer groups – market segmentation

Little of what is best in marketing theory and practice works without correct market segmentation. It is one of the most fundamental concepts in marketing and your choice of which approach to adopt will directly affect the impact of segmentation on your business.

Market segmentation, correctly applied, is about understanding the needs of customers and, therefore, how they decide between one offer and another. This insight is used to form groups of customers who share the same or very similar value criteria. A company is then able to determine which groups of customers it is best suited to serve and which product and service offers will both meet the needs of its selected segments and outperform the competition.

Read the rest of this entry »

Reading the CMT’s October’s report, I realized that we never position ourselves in the blog on how we see the spanish telecom market. With that objective, I would like to share some insights related to spanish telecom KPIs and competitive environment, how do we think the crisis will impact this market and what to do (in the operator’s perspective).

The Spanish telecom market has changed considerably since the liberalization of its mobile market in 1995 and of its fixed line market in 1998. Telecom service revenues have grown steadily since the 1990s until 2008, first year to see a slight decrease in revenues.

As posted in our previous post “Replacement cycles are stretching and now, price matters“, the telecommunication providers reached 4.7% less revenues in the second quarter of 2008, Vodafone and Telefónica reported a relevant deceleration in their client’s average revenues per minute as a result of the significant decrease of the minutes of use of consumption.

The following slides are just a set of common-sense thinking ideas that we believe might mitigate the impact of the situation we are currently suffering. Feel free to challenge.

Best. CVA