How should operators manage through an economic downturn?

The financial markets took the telecom markets on a wild ride last weeks. Who knows which direction we will move this week but most believe we are headed for an extended downturn in the economy which will put companies, large and small, at risk. While no one knows how long or deep this downturn will be, there is a clearly appropriate strategy – prepare for the worst and seize the best opportunities when they come.  With this I would like to share with you mmC GROUP’s perspective on the actions that telecom operators need to take in the coming quarters.

We see six main lessons learnt and key challenges that telecom operators should address in the coming financial slow down times. These cover both short-term reactions and mid term organization transformation measures that can be seen in the following slide:

If we have to conclude with some recommendations on how operators should respond, here is what we’d say:

A) Customer First – Operator are constantly recommitted to improving the quality of service that they deliver to customers.  By putting the Customer First in how they think about the business, they will strengthen the value delivered, secure their current business and provide a platform to grow on.  They have to put in place metrics, clarified processes and bring a spotlight to everything they do at the customer interface.  In an environment where every cent counts, customers will be expecting even greater value so telecommunication operators must deliver exceptional service.  This should remain a top objective.

B) Integrate Now – One thing that has become apparent to most of the operators in where we are currently working is that they are working on too many things and battling on too many fronts.  One of the root causes is the state of our integration (acquisitions) and de-integration. This is hard work and living with multiple core processes means confusion and extra resources.   In most of the cases, operators have to redouble their efforts to complete this critical work in a timely way.  That doesn’t mean they aren’t work hard enough — they just have to focus their efforts, make 80/20 tradeoffs and quick decisions, engage help where needed and defer less pressing work.

C) Stabilize Revenue – While my clients would all love to grow their business aggressively, now is not the time.  Fixed and mobile operators should be focusing on retention and selling new services to existing customers.  They are not going to stop developing new customers but should be deferring planned additions to sales staff and marketing investment until we have better visibility into the business environment.  Keeping the current customers, growing those relationships with more services and growing with new customers where they can, should be their plan.   Given the different states of maturity and installed based, this approach may vary by market but, realistically, that means that operators will be setting lower top line growth goals overall and expecting a better cash flow result based on deferred investment.

D) Improve Profitability – The bottom line is the bottom line.  The above items should all contribute to better cash flow and EBITDA margin performance but operator need to do more, and should be a combination of action and insight.  They have to look everywhere for cost savings.  That starts with challenging every euro spent to ensure it is an investment.  This is as simple as being cost conscious in what they buy and as challenging as lowering the expenditure by rearchitecting their networks.

The insight they need is to fully understand the profitability of what they sell, how they sell it and how they service it.  It is easy to get enamoured with more sales but harder to know how those sales are impacting their profits.  Operators should start focusing on understanding the true contribution from each of our products and channels so they know where to put the attention and action.
Best regards
CVA