Revenue management lessons for telcos

GUEST COLUMN

One of the most dynamic industries today is telecommunications. Telecom operators are transforming from being classic telephony providers into aggregators and distributors of multimedia and entertainment services, which include converged communications, gaming, social networking, news and the like. As they say, content makes the king.

The objective of every service provider is acquisition and retention of subscribers. Service providers face a challenge to attain an optimal balance between providing what today’s subscriber wants – a combination of services, voice, content, video, etc., anytime, anywhere – and profitability, by containing costs while revenues rise. Sustainable profitability is what matters.

When considering next-generation networks and services, operators have a high degree of uncertainty about the impact of these new services on their operations.

Plus, with many products still being rolled out in mass-markets for the first time, it is difficult for an operator to know what challenges will arise during the course of the network roll-out and the subsequent customer response.

This is especially true of emerging markets like Asia-Pacific (APAC), the fastest growing mobile subscription market in the world today. APAC includes India and China, and the mature mobile markets, like Japan, South Korea, Hong Kong and Taiwan.

Key factors affecting telecommunications evolution in these markets include strong potential growth in rural areas, industry consolidation driven by foreign investment, network upgrades and expansion, and easy access to second-hand and low-cost devices.

In India, the growing number of youngsters who are interested in data services, along with their growing purchasing capacity, are driving growth.

Marketers across various industries are looking at sophisticated, targeted marketing techniques to tap new market segments, such as mobile-commerce, mobile-gaming etc.

The flip side to tapping a developing region is the possible increase of certain types of revenue leakage, like fraud and operational errors as well as billing and credit management issues.

Operators are realising the need for efficient operations to cut these losses. Service providers are seeking to transform themselves into “efficient operators” who can extract the greatest value out of their resources and grow with sustained profitability.

The core of these revenue and cost management efforts is emerging from the revenue management sector, of which Subex is a part. Revenue management entails reducing risks to the revenue chain and includes concepts like revenue assurance, fraud management, cost assurance and related areas.

The most effective method to balance cost and revenue is a revenue management model that operates in a consolidated form across the entire business.

An emerging mechanism for achieving this enterprise-wide view is the Revenue Operations Centre (ROC), a framework of systems and processes that enables ‘operational assurance’, helping the service provider understand the impact of operational processes and outcomes on profit.

ROC allows operators to keep an eye on the financial performance (e.g. total revenue, ARPU, subscriber growth), revenue performance (e.g. revenue/ cost by category, revenue/ fraud loss) and operational performance (e.g. revenue/fraud/ bad debt loss by root cause) across their networks.

Operator can track costs associated with delivering services, and arrive at an understanding of the profitability of different service types using ROC.

More than ever, revenue management needs to become a high-level strategic initiative for operators to compete and sustain in the changing telecom marketplace and grow their current customer base.

The author is founder chairman, managing director and CEO of India’s leading software product company, Subex Ltd, and chairman of the Nasscom Product Forum.