Channel Fraud management in telecom.

Following my previous post related to churn management, there’s another type of churn of which I would like to post. It’s the type of churn you can’t beat with common churn reduction initiatives, as it has nothing to do with abandonment. I’m referring to churn in origin.

For “churners in origin” we understand those clients that never really existed but were virtually created by the distribution and sales channels, with the clear objective of getting the commissions and channel incentives whilst, at the same time, deteriorating significantly the acquisition, subscribers acquisition costs (SAC) and churn rates.

It is a common practice in heavy acquisition environments to see how the sales and distribution channels get an illicit benefit of creating fake activations and pushing SIMs to the market just for the sake of earning more commissions thanks to a badly designed incentive schemes of some telecom operators.

We just finished a project where I’ve seen almost everything. I would like to share the three top fraud practices I saw, that made me smile and made my client cry:

1) distributors and POS activating SIMs previously to selling them through non-regular distribution Networks at a lower price 2) distributors making fake activations and signing fake contracts that are sent to the operators afterwards, and 3) distributors making Offnet calls to the previously activated sim to get the consumption commission on top the activation and contract fulfillment ones.

My client cried because the significant negative contribution that these practices had in last quarter’s EBITDA, making it almost impossible for the commercial departments to meet business expectations. Expectations related to acquisition, market share, revenues, operational efficiency and SAC.

I smiled because we’ve seen this several times in our the consulting experience and therefore we were able to advise them with quick wins and a more-than-proven methodology to identify, diagnose and avoid channel and distribution fraud practices in the telecom industry.

This is the subject of case attached next. Take a look at how 3 simple practices can be avoided with a minimum of common sense and a focused approach and methodology. I come now to remember that once-made-recommendation that a former France telecom executive made to my partner Fran and me, “there’s a huge business in the sales and distribution network. With all that knowledge you should’ve built a commercial network instead of an advisory firm. You would earn more money”. Now I understand to what he was referring to. 😉

Enjoy the reading.
CVA, Flying to Buenos Aires.

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