OPINIONS

Increasing the precision of network CAPEX

Are you a mobile operator competing in a competitive mature market?

If this is the case, then the following probably applies to you (on average):

  • 15% of your service revenue goes to CAPEX
  • Of that, 80% goes into your network
  • 30% of your net OPEX goes into the network

Summing up CAPEX and OPEX, 45% of your total cost as an operator goes into the network.

With marketing & sales representing on average 35% and customer service 20% of overall costs, it is no surprise that operator management often looks at the network department first when cost cuts are on the agenda. Yet, our message is clear: Stop cutting, challenge your thinking and transform. If you transform the way you work, you can increase the precision of your network CAPEX.

The dilemma

It is your network that is the basis for your revenue generation as an operator. Without network coverage, without sufficient capacity and without sufficient quality your customers can’t use the megabytes, the texts or the minutes they pay for.

Network quality is also – still, one can add – a key driver for customer loyalty and the operator’s brand.

In mature markets, there are, in essence, no new customers out there. Everyone who wants a mobile phone (or a connected device) already has one. The key to success for any mobile operator is therefore its ability to keep customers sufficiently satisfied for them to remain loyal and not to switch to competition.

In this scenario, what happens to churn if network costs are simply cut?

The ultra-competitive network environment of 2017

Performing an annual drive test and publishing this as proof that a network is the best in the country, is no longer on its own sufficient. Along with drive tests, there are new ways to measure the network and customer experience. While drive tests are controlled measurements, crowdsourcing indicates better how customers perceive network quality. Operators’ networks are today constantly monitored by competitors, regulators, consumer organisations, magazines and third party consultants, but also by apps, such as Ookla and OpenSignal, that automatically crowdsource the performance data from thousands of users. Network performance has become a big business for many and operators are no longer in control of how it is communicated.

When winning, operators are happy to relay the results of these network tests. Owning the perception of leading in network quality has become business critical for most operators in this ultra-competitive environment. Traditional cost cutting risks the fragile perception of network quality.

The conflicting drivers

At the same time customer expectations are growing while consumers can select services from a wide choice of providers. Constant access to communications is for many important for the quality of life – both private and business. Data usage is increasing fast, but the willingness to pay for it isn’t.

All these conflicting drivers risk pulling the network apart.

 

So if cost cutting isn’t possible, what should be done?

Stop cutting, start transforming

If you transform the way you work, you can increase the precision of your network CAPEX. This means you can meet customer expectations better while improving your return of investment (RoI). CAPEX savings of 20%+ are realistic.

But maybe you shouldn’t cut the network CAPEX. With an improved RoI, you might actually want to use more, not less, on the network.

Regardless, it all starts with setting precise QoS targets – precise with regards to location, but also precise in the targeted performance level of each end-user service.

Look at the flowchart: When you no longer build a “best-effort” network for an average customer – that doesn’t exist anyhow – your CAPEX precision becomes much better. Your customers will then reward you for the precise and high quality with higher service usage. And high-usage customers are also loyal – so why limit their behaviour?

Since a major cost item – typically 15-20% of service revenues – for a mature market operator is customer acquisition and retention, high customer loyalty leads to a good margin and your improved CAPEX precision leads to a good RoI.

Follow us and download the full analysis

In the coming weeks we will publish more insights and lessons from operators on all the aspects of CAPEX precision – including video interviews with DNA, Telenor, Tele2 and Omnitele.

We will offer you a snapshot on 45 operators and their relative strengths (and weaknesses) in CAPEX efficiency. More importantly, we will introduce the principle and practical steps you need to take to achieve #CAPEXprecision and finally explain how #OmniteleCoDriver can change your thinking.

 

You can start by downloading our analysis “Increasing the precision of network CAPEX”.

 

Visit us at MWC in Barcelona, 27th February to 2nd March, to understand how Omnitele CoDriver™ could be used to transform your network. You can find Omnitele in Hall 5 at stand number C45. Book the Meeting!