Cost Management – a topic in focus

When profits are to decline 85% in 2011-12, the cause of sustainability of business is burning the need of the hour. Review this article on the Indian telecom space- the second largest on this planet after China.. The chief reasons are attributed to:

  1. higher depreciation charges due to the heavy borrowings for acquiring 3G licences and rolling out 3G services
  2. Over spending on infrastructure
  3. Hyper competition

The articles states “The total number of telephones has increased from 429.73 million on 31st March 2009 to 926.55 million on 31st December 2011.

The growth of wireless connections has been phenomenal, reaching 893.86 million connections at the end of December 2011. As a result, the share of wireless telephones has increased from 80.3 per cent in March 2007 to 96.4 percent in December 2011.”

These are staggering “growth” numbers, but what good is growth when the operators are cash strapped? I had learnt- “revenue is vanity, profit is sanity, and cash is reality”!

Often we have debated on the scope of Revenue Assurance, but here is a clear case where the task of RA has to simply outgrow from only making sure that leakages are fixed to actually ensuring that the bottom line is held in place while concentrating on the top line. As a matter of fact, according to ABI Research’s new study, “Indian Mobile Broadband Market,” Indian operators are executing a number of initiatives: offloading their capital and operating expenditure-intensive base station towers to tower management companies; forging relationships with not just Nokia, Samsung, and LG, but also lower cost handset manufacturers such as Huawei, ZTE, Micromax, and G’Five; repackaging their data plans into more affordable, lower-tier options; introducing not just low-cost tablets, but also 3G data plans; and encouraging “local” apps developers to create “local” software apps and content. Essentially the focus of cost containment is in place, and therefore it becomes even more important for RA teams to get real and account for both top lines and bottom lines.

It is time to get the ‘cash’ in place only to ensure business sustains!

 

Moinak Banerjee
Moinak works at Protiviti Kuwait, as Product Lead for their Risk Technology Services. Over the years, he has worked in product management for several leading vendors of telecom OSS/BSS software.